William Blair partnered with 100 Women in Finance to host an insightful discussion on current themes in sustainable investing featuring female professionals in the financial services sector.
William Blair recently joined 100 Women in Finance, a global network of finance professionals, as an effort to engage more women in topics impacting the financial services sector, and ultimately attracting and cultivating female talent in the finance industry.
Laura Coy, head of philanthropy strategy and ESG integration for William Blair, moderated the event on September 22 at the firm’s Chicago headquarters. Shivani Patel, a sustainability research analyst with William Blair Investment Management, was among the guest panelists.
Others on the Navigating Regulations on ESG Climate Investing panel were with Driehaus Capital Management, Ropes & Gray law firm, and ISS ESG, a global provider of ESG data.
The group discussed the latest ESG regulatory developments facing the investment industry and the opportunities emerging around data, disclosures, materiality, and engagement. These forces are shaping the future of ESG investing, a field that is accelerating to address the consideration of material environmental, social, and corporate governance factors in investment decision-making.
“I don’t think this topic could be any more timely or important to the work we do in the financial services industry and as citizens of this world that is evolving, changing, and warming,” Coy said in welcoming guests and members of 100 Women in Finance to the event.
ESG Analysis
Investors and corporations are increasingly applying environmental, societal, and governmental data as part of their analysis in identifying the material risks and growth opportunities for companies. With the availability of non-traditional data sets, analysts can evaluate the sustainability of a company, identifying those best positioned for future long-term resiliency and profitability.
Coy and the panelists said the availability of accurate, comparable data, and the evolving reporting requirements for companies and investment firms are the most talked-about issues among asset managers today. ESG data varies in type and scope, making it complex to collect and evaluate. That said, companies across the market capitalization spectrum are increasingly disclosing ESG data. And the issue of providing relevant data can be an opportunity for companies and investment managers to partner to discuss what data is most material for investment decision-making.
Patel, a member of William Blair Investment Management's U.S. Growth and Core Equity team, said she and her team incorporate ESG data into fundamental analysis of companies to gain a deeper understanding of how a company operates and creates value. In evaluating a company, the team analyzes material ESG factors—topics deemed significant to investment decision-making.
“As active managers, we can bring a unique lens to the table because we look beyond ESG scores provided by third party providers,” she said. “We use proprietary materiality maps as a guide to research topics that are relevant to companies at the sector level and subsector level and apply further judgment at the company level.”
That analysis runs across the breadth of companies her team follows, from small and mid-cap companies to large-cap companies.
Disclosing ESG Info
On the regulatory front, Europe and the United States are taking different approaches on requiring companies to disclose information on how they operate and manage social and environmental factors. But both are moving ahead.
The EU has adopted the Corporate Sustainability Reporting Directive. In the United States, the Securities Exchange Commission for the first time has proposed a rule making it mandatory for all publicly traded companies to publish standardized climate disclosures, including scope emissions and information on how climate factors impact company strategy, operations, governance, and risk management.
Even though the regulatory environment can be complicated and the mounting data needed to report emissions can seem daunting, Patel said, one of the outcomes of disclosure regulations is that the availability of material ESG data, and over time the quality of that data, is expected to improve.
“As the Financial Stability Board has stated, climate change has implications for the stability of financial systems which makes it a material issue to central banks globally,” Patel added. “Strategic and material steps will be taken to preserve stability.”