Everything, everywhere, all at once

ESG: The next chapter
It wasn’t that long ago that investment marketers had hoped that the interpretation of ambiguous ESG terms would become a thing of the past after the European Union published its initial taxonomy.

This classification system was supposed to create a list – which industry leaders signed off on – that would set rules around the description of specific activities and approaches. The days where ‘impact investment’ was used to describe any investment that had a consequence should have been numbered.

At this year’s conference, however, delegates heard that, while numerous industry parties worked to agree the boundaries of the original taxonomy (effected July 2020), there remains room for interpretation. This has left the potential for marketers to face allegations of greenwashing when their interpretation differs to that of their peers.

To add to the complexity, the UK, which “onshored” the EU taxonomy after Brexit, was supposed to be pushing ahead with its own UK Green Taxonomy, but this project has now been delayed, with a new timeline not yet published at the time of writing.

While, on the main stage, delegates heard about the problems from ambiguity and the taxonomy, exhibitors in the conference hall were discussing problems arising from a lack of standardisation of data. The latter was a central marketing theme for several securities services exhibitors at the event, including Linedata.

Speaking to Financial Promoter, Henri Berthe, a product manager for Linedata’s asset management business line, explained that the company had been holding multiple conversations with asset managers and depositary banks at the conference to improve ESG compliance.

“It has become common for organisations to struggle with ESG data because providers supply it in such different formats,” he said, referencing the differences between data provision from S&P, Sustainalytics, MSCI and Arabesque as examples.

At this year’s Asset Management Conference in Luxembourg, Linedata was showcasing its compliance, risk and oversight services, including a new tool that gathers ESG data from multiple sources and standardises the output.

“We have been working with a French start up to improve the usefulness of ESG datasets,” Berthe explained.

“Clients want reliable data and they are telling us that they have regulatory concerns relating to ESG and level two implementation of SFDR (the Sustainable Finance Disclosure Regulation).”

Berthe is a long-time supporter of the conference, stating that the event is particularly useful for showcasing services to potential buyers and acting as a meeting place for peers with whom collaboration may be possible.

Tokenisation and digital tech
Another company with an established presence at the event is State Street, the US banking giant. This year, the bank presented insights from its proprietary research on the main stage, detailing the growing interest in the digital tokenisation of mainstream asset classes. Luxembourg was a solid choice for the presentation, given the country’s progressive regulations on digital ledger technology and tokenisation.

State Street’s discussion panel included Nasir Zubairi, chief executive of the Luxembourg House of Financial Technology Foundation, an organisation which is conducting its own survey on trends in crypto assets – the second such piece of research.

Zubairi was keen to underscore that the pace of change in tokenisation was now quickening, with mainstream players in capital markets now considering how this will affect their future products, services and operations.

He recalled a visit to London a few weeks earlier where he discussed the complexities of establishing crypto sub-funds with the chief executives of both Abrdn and Man Group.

For State Street, however, one major piece of work is exploring the potential for further innovation in money market funds, according to Luke Brereton, global head of client acquisition for GlobalLink and State Street Digital.

“Tokenisation of money market funds is one of the big projects we are working on this year,” Brereton told delegates. “We work with institutional investors, and it is clear there is a drive to get these funds tokenised.”

Brereton explained that future- minded asset managers need to “have an appreciation” of the potential of new technologies, but it was the responsibility of service providers, like State Street, to bring emerging business solutions forward.

“The conversations I have with asset managers around the world is that people are looking at their value chain and how they can compress that. They are asking ‘how do I get closer to the end investor?’ and this is just one component which could help them to execute on those plans. Over the past year or so, the emergence of tokenisation has dominated our conversations with clients.”