AustralianSuper, PGGM ramp up ESG data collection efforts
Leading institutional investors in Asia and Europe are stepping up efforts to collect their own ESG information rather than relying exclusively on third party data providers, as reputational risks of collecting inaccurate information increase.
“It is reputational for us: we don’t want to leave it to a third party to do it, we want to do it ourselves. That way we can ensure what we do is genuine, transparent, and something we can report on,” said Hans Op’t Veld, principal director for responsible investments at PGGM Investments, the investment manager for the €228 billion ($248 billion) Dutch pension fund.
PGGM
Op’t Veld added that the growing adoption of products based in the Asset Owner Platform (AOP) was expanding.
PGGM relies heavily on data collected via the Sustainable Development Investment Asset Owner Platform (SDI AOP), the world’s largest investor-led sustainable investment platform (alongside Australian Super, Canada’s British Columbia Investment Management Corporation, and APG, PGGM is a founder member of the SDI AOP).
Using the data collected via SDI AOP, PGGM reports on its performance using a five-point scale in its annual report, including confidence levels for each of its scores.
BROKEN PROMISES
Op’t Veld, who is also chair of the markets and members committee at SDI AOP, said that in many cases companies did not comply with the ESG policies they espoused.
He gave the example of a large international energy company, which he declined to name, where the public communications by the company around shifting its business to more renewable energy sources were contradicted by a close analysis of the company’s published financial reporting around spending on technology to foster future innovation.
“We found that this spend was higher for the traditional fossil fuels business than for the renewables business and, over time, the balance was not shifting in favour of renewables. We didn’t find in the accounts what they were saying about their intentions around a transition in their public language,” he said.
Serlina Chu, director of ESG and stewardship at AustralianSuper, Australia’s largest superannuation fund, with A$258 billion ($179 billion) in AUM, flagged growing concern about the reliability of data provided by companies about their ESG activities.
“We are seeing increasing regulatory focus and heightened sensitivity across multiple jurisdictions over concerns around potential misrepresentation of claims about investment outcomes,” she said.
Recent years have seen authorities cracking down on greenwashing by investment managers in Europe and the US. In June 2022, the US SEC handed the first major enforcement action in the form of a fine to BNY Mellon. In September 2021, 63 of 125 asset management firms were found to have failed to meet beefed-up requirements under the UK’s latest stewardship code.
STEPPING UP
AustralianSuper has stepped up its efforts to collect better data, Chu said. “We collect ESG data from our directly held private market investments annually."
Allianz RE
“In the last year, we have bolstered this process by engaging an external consultant to enhance this process, including aligning categories of information requests with international guidance, recognised definitions based on jurisdictions for occupational health and safety-related matters, or standards such as GRI, WEF, SASB, and ILPA. This will provide more consistent data for our monitoring and engagement program,” she said.
Dr Raphael Mertens, chief sustainability officer for Allianz Real Estate, told AsianInvestor that on occasion, managing reputational risk meant being more cautious than local regulations required.
As an example, he pointed to a logistics development the company was considering buying, which occupied a location that had previously been environmentally protected, before the zone boundaries were redrawn.
“The location of the project could be seen as negative environmentally, since it has probably destroyed biodiversity. So we decided not to invest,” he said. “Thorough analysis and screening is so important: we have zero tolerance for reputational risk.”