Fund Operator: What makes ESG data different to the data you are more familiar with?

Martin: It is only unfamiliar in that it is more recent than a number of data elements that the industry has been working with on for years.

Everyone is familiar with positions, transactions, benchmark returns, ratings, portfolio breakdowns, etc. To date this has been what clients have looked for, so these areas have been industrialised and standardised over time.

"There isn’t anything that is incredibly complex about the data."

ESG data is a further evolution of this, underpinned by how clients think about their investments and their broader societal role.

There isn’t anything that is incredibly complex about the data. It’s a different data set that has to live hand in hand with existing, more established data sets and interact in the way that the clients want to see their exposures and risks.

Fund Operator: Does this depend on geographies, are some geographies more ‘ahead of the game’ than others?

Martin: Many of our clients are global so I don’t feel that this is singularly an issue with a particular region. It’s something that we have to solve globally.

Obviously, regulation will continue to evolve in this space as well, so all asset managers will have to keep a keen eye on the jurisdictions in which they are delivering outcomes for clients.

Fund Operator: Does this issue speak to a larger challenge related to the data standardisation gap between public and private markets?

Martin: It is different, but I can see some parallels in that both ESG and private markets are evolving from a data and supply chain perspective. We haven’t got to full standardisation in the public market space.

Things like SWIFT and FPML have definitely allowed the public market environments to be transformed - massively increasing efficiency, reducing settlement failure rates, etc.

Alongside this, every asset manager in the public market space now either creates or sources an investment book of records or IBOR, as we like to call it. This was the last significant development in the public markets data space.

In the private markets space, I see lots of opportunity for improvements in data availability and standardisation.

Asset managers need an equivalent of an IBOR in the private market space, and this is what we are seeing developing. There is more sourcing of high quality, reliable, accurate and timely data to enable portfolio management, performance, and client reporting.

"I can see some parallels in that both ESG and private markets are evolving from a data and supply chain perspective"

In the public market space, there is now a significant outsource market with quite a few key players who can meet your holistic needs on a pan-asset class basis. In the private market space,

I am not sure that there are many firms who could say that they could solve all of your data problems, across all of the private market sub-asset classes, such as private equity, real estate, infrastructure, private credit and hedge funds.

This is something that will be quite interesting to watch over the next few years. There is a huge focus on the growth of the private market asset space, and it feels ripe for further transformation in the data and IBOR equivalent space.

"It does feel as though there is a bit more maturity in the overall supply chain"

Considering ESG data, whenever there is a need for more data, there are always going to be firms who seek to maximise that opportunity.

As you might expect, some of the traditional players have already entered that market. They are well versed in the business of sourcing and distributing data in a manner that asset managers want to consume, across the full chain of investment manufacture, through to client reporting.

It does feel as though there is a bit more maturity in the overall supply chain, compared to what we currently see in the private market space. It is about firms now stepping in and filling the gaps, where the opportunities exist.

 

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