The client is a leading global asset management firm with over $200 billion in Assets Under Management (AUM). They offer a broad range of products across fixed-income, equities, emerging markets, and alternative investments. With billions of dollars in assets under management, the firm needs a comprehensive ESG Analytics dashboard to effectively track and monitor the investment performance by incorporating environmental, social, and governance (ESG) factors to market risk and make informed investment decisions.The Client
The client is a leading global asset management firm with over $200 billion in Assets Under Management (AUM). They offer a broad range of products across fixed-income, equities, emerging markets, and alternative investments. With billions of dollars in assets under management, the firm needs a comprehensive ESG Analytics dashboard to effectively track and monitor the investment performance by incorporating environmental, social, and governance (ESG) factors to market risk and make informed investment decisions.
Challenges Faced by the Client
The future of finance goes hand in hand with social responsibility, environmental stewardship, and corporate ethics.
In order to stay competitive, Financial Services Institutions (FSI) are increasingly disclosing more information about their environmental, social, and governance (ESG) performance. By better understanding and quantifying the sustainability and societal impact of any investment in a company or business, FSIs can mitigate reputation risk and maintain trust with both the clients and shareholders.
We increasingly hear from our customers that ESG has become a C-suite priority.
This is not solely driven by altruism but also by economics: Higher ESG ratings are generally positively correlated with valuation and profitability while negatively correlated with volatility.
Without ESG analytics,
- Financial institutions may lack comprehensive risk assessment capabilities. They may overlook important ESG-related risks, such as climate change impacts, social controversies, or governance issues, which can have a significant impact on an organization’s financial performance and sustainability.
- Financial institutions may struggle to evaluate the ESG performance of organization in their investment portfolios without ESG analytics. They may not have the necessary tools and metrics to assess the environmental and social impact of their investments, making it difficult to measure the alignment of their portfolios with sustainability goals.
- Without ESG analytics, financial institutions may rely solely on traditional financial metrics, overlooking important non-financial aspects of an organization’s performance and sustainability. This can result in incomplete investment decisions and suboptimal portfolio performance.
Solutions
UBTI, with certified and experienced professionals in Power BI, implemented the ESG dashboard considering all the client’s pain points.
We get the MSCI ESG data, which provides comprehensive ESG ratings and scores for thousands of companies globally. The data includes various ESG metrics, such as carbon emissions, diversity, labour practices, and governance practices.
The data is loaded into backend database and the history is preserved so that it can be tracked and monitored over time.
The data is stored for the requested portfolios. The ESG Analytics dashboard is built to display and visualize the ESG metrics loaded from the backend database. The dashboard will help to Identify portfolios with strong ESG performance and those with potential risks or controversies.
Solutions Benefits
- ESG Integration: The financial institution successfully integrates MSCI ESG data into its investment decision-making process, considering ESG factors alongside financial metrics.
- Improved Risk Management: The dashboard identifies potential ESG risks and controversies associated with the organizations, enabling better risk management and informed investment decisions.
- Enhanced Sustainability: By selecting portfolios with strong ESG performance, the institutions align their investment portfolio with sustainability goals and contributes to a more sustainable economy.
- Client Engagement: Financial institutions can communicate their ESG analytics capabilities and provide transparent reporting to clients interested in sustainable investments, attracting and retaining ESG-focused investors.
- Historical Performance Evaluation: Regular monitoring and evaluation of the ESG performance of portfolio holdings allow the institution to assess the impact of ESG integration on financial performance. The performance evaluation can be performed using the historical ratings and metrics which helps the financial institutions in better investment decisions.
- Portfolio Analysis and Optimization: The ESG Analytics integrates the ESG data with the financial institution’s portfolio holdings and financial data, which enables to Optimize the portfolio by incorporating ESG constraints and objectives using techniques like mean-variance optimization or multi-objective optimization.
