Environmental, Social and Corporate Governance (ESG): is it business as usual?

20 February, 2020

The EU Action Plan on Financing Sustainable Growth is dramatically changing perceptions of the importance of ESG factors within the European asset management industry. Will this comprehensive strategy—with three main objectives and ten associated actions—impact the asset management industry in Ireland this much?

The answer, in short, is yes.

For four of the actions—benchmarking, disclosures, green bonds and taxonomy—technical expert groups (TEG) will assist policymakers. The outcome of the work performed by them will likely affect the Irish Asset Management industry not least in the areas of compliance, strategy, product governance and reporting. While some may see the deadline for compliance as being many months or years away, the time to prepare is now.

There will be considerable discussions surrounding these actions, and the timelines for finalising of the underlying regulations are not yet known. However, some dates and deadlines are anticipated:

  • The methodology compliance deadline for Benchmark Administrators is expected by the end of April 2020
  • The estimated date for the submission of Regulatory Technical Standards (RTS) on the Disclosure Regulations is 30 December 2020, while March 2021 will see these disclosures come into effect
  • By January 2022, transparency at the product level will need to be included within periodic reporting
  • The Taxonomy proposal will be implemented through a phased agenda from June 2020 through to December 2022

How can the asset management industry within Ireland ensure that they stay abreast of these timelines and requirements? Can they ensure that as an entity operating in Ireland, they are ready and fully compliant? What do Irish asset managers, and the industry as a whole, need to be considering?

An initial consideration could be: do I want to be a leader in this area, or will I settle for being in the middle of the pack? In our recent "Asset and Wealth Management Revolution: Investor perspectives — Rethinking purpose and performance" report, we identified that investors as a group ranked ESG as one of their top priorities, outranking fees. By settling to be middle of the pack, are you reducing your attractiveness to investors and ultimately harming your business?

Will ESG integrated products become the norm? Will there be a demand for non-ESG products?

Irish asset managers will need to revisit their product offering, looking to match investor preferences with existing or even new products. Are they ready to make these decisions? And if new products are offered, or they are amending existing products, they need to have underlying offering documents and marketing materials updated. Has this been accounted for in the current year budget and timeline of activity?

The tone needs to be set from the top in every impacted organisation concerning new regulations which will be coming through in this area. Otherwise, adoption in full will not be achieved, or not executed to its fullest potential. On this note, the tone cannot be set without the leaders being fully aware of all changes, the potential effects of these changes and the associated actions which are required. Is there a need for retraining, reskilling or upskilling at the top - and, in fact, across your whole organisation?

Even if the tone is set from the top, and the appropriate levels of upskilling adopted, Irish asset managers should also be looking to see whether their internal technology systems can handle these changes. Take as an example, the new disclosure requirements. Asset managers will need specific data for these both internal and external are their systems equipped to generate this or will a degree of upskilling be required within their technology systems as well? Can their current systems deal with the need for sensitivity analysis and risk assessments?

The above are only a handful of the considerations which need to be taken by those operating within the Irish Asset and Wealth Management industry. Talk to us today about your concerns and considerations, we're looking forward to hearing from you.

Business people sitting around a table and going through their notes.

Contact us

Ken Owens

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 8542

Lesley Bell

Director, PwC Ireland (Republic of)

Tel: +353 1 792 8133

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