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The ESG Compliance Podcast – Unfolding ESG for Private Investments

By February 9, 2022May 23rd, 2022No Comments

Trysha Daskam, Head of ESG Strategy at Silver, sat down with host, Tom Fox, for the inaugural episode of The ESG Compliance Podcast, titled “Unfolding ESG for Private Investments with Trysha Daskam.” Following is a summary of the discussion. A link to the full episode is below. 

Trysha and Tom dig into the pressing issues that impact ESG program development from an investment manager’s perspective. She offers a deep dive on the ways in which Silver helps their clients thrive with their ESG programs by carefully evaluating managerial decisions they are making through the lens of their investment strategy to understand how ESG can fit within that strategy. Some of the key themes covered during the course of the conversation include: 

  • The SEC’s risk alert from April 2021, which provides observations of deficiencies and internal control weaknesses from examinations of investment advisers and funds regarding ESG investing. She notes that regulators are more focused on ESG now given investor demand, so ESG programs should be treated with the same cautiousness and prudence as other policies, which includes a focus on training members to regulate and execute the program efficiently and properly.
  • The ways in which investment managers can implement and execute a successful ESG program. One key thing to remember is that having an ESG program is more than just an idea. Trysha describes how she and her team partner with investment firms in order to bring these strategies through the full lifecycle of inception to maturation by putting the correct procedures, monitoring practices, and tools in place.
  • ESG has grown for fund managers over the past year. In 2021, the focus was on climate risk, mitigation, and adaptation, as well as transparency in diversity, equity and inclusion (“DEI”) programs, and the evaluation of DEI statistics from an investment practice (read our thoughts on DEI here). Financial services are now starting to feel the pressure to focus on sustainability, socially responsible investing, and ESG. Trysha believes 2022 will be a hallmark year for regulatory momentum among fund managers.
  • The three key areas of focus for private investment managers in 2022, including: (i) demands for enhanced ESG disclosure from the investor base and regulatory space; (ii) managers will be pressed to substantiate the claims they make in their ESG policies and writings, and increased evidence for how firms set and manage the ESG targets and goals that they set; and, (iii) firms will need to articulate their approach to climate risk and adaptation regardless of whether the investment strategy aligns with the climate risks that the market has identified.
  • Greenwashing remains a very important focal point for regulators and investors as managers are being asked for more transparent information about what they are doing and what they intend to do. The SEC sees it as “a major risk in the current marketplace.” Trysha points out that there will be an urgent call for established standards to be put into place that lay out what firms will be expected to be doing based on the language they are using. 
  • At the end of 2021, the Institutional Limited Partners Association (“ILPA”) and the Principles for Responsible Investment (“PRI”) updated their widely used due diligence questionnaires, which included questions related to DEI. There is a precedent for managers to be responding to DEI questions from their investor base on a more regular and routine basis as questions mature in a more meaningful way, says Trysha. For example, managers are being asked to evaluate diversity among their employees across a number of different statistics, including what diversity looks like among the different levels at your firm. Trysha mentions we could see SEC imposed regulatory obligations around transparent reporting come out potentially in 2022. 
  • The lack of international standardization has been an industry swan song for a long time, but we are seeing some light starting to shed on the evaluation, determination, and ultimately the development of standards that managers can look to. Trysha points out that standardization progress is projected for 2022 as the International Finance Reporting Standards Foundation (“IFRS”) developed the International Sustainability Standards Board (“ISSB”), which she thinks could make great moves in the year ahead as it aims to produce baseline reporting standards that should lead to comparable, decision-useful data for investors.