Environmental Risk Framework

After publishing guidelines for environmental risk management in December 2020, the Monetary Authority of Singapore expects asset managers to implement a comprehensive framework to manage and disclose environmental risks throughout their investment processes.

We provide investment managers with a cost-effective, end-to-end ESG solution that combines integration consulting for core activities and an outsourced managed service for non-core ESG-critical activities. Our structured service helps investment managers holistically integrate ESG best practice into their investment process, comply with new MAS guidelines, and strengthen the resilience of client assets against environmental risk.

How we can help

There are two common options for integrating ESG into an asset manager’s organisational structure: allocating responsibility to existing investment teams and building a separate dedicated ESG team. We outline the pros and cons of each approach in a blog post here.

Invartis offer a third option; a service that maximizes the advantages of both structures while mitigating their disadvantages. Our service combines an outsourced managed service for detailed ESG analysis at a security and portfolio level, and integration consulting to fully integrate ESG into the overall research and investment decision-making process. We have structured our model at two service levels for clients with different strategic priorities, both helping asset managers holistically integrate ESG into the investment process, align with evolving ESG best practice, and comply with MAS guidelines on environmental risk.

Our framework starts by assessing materiality and subsequently delves into 5 key areas of the investment process:

  • Governance and strategy
  • Research and portfolio construction
  • Risk management
  • Stewardship
  • Disclosure

Materiality

Environmental factors have the potential to financially impact funds and mandates managed by asset managers through physical and transition risks. We help asset managers ensure the resilience of their customers’ assets against the impact of environmental risk by performing regular and comprehensive materiality assessments.

Governance and strategy

Ensuring the board and senior management oversee the integration of environmental risk into the investment process and can effectively govern environmental risk management and disclosures going forward.

Research and portfolio construction

Helping asset management firms consider both transition and physical risks at an individual asset, sector, asset class, and/or at a portfolio level. We help align practice with international standards and frameworks to fully embed environmental risk into research and portfolio construction.

Risk management

Ensuring appropriate processes and systems are in place to monitor, assess, manage, and escalate potential and actual impact of environmental risk on individual investments and portfolios. We help build capabilities to develop scenario analysis that assess impact on portfolios, including the resilience to financial loss under a range of outcomes.

Stewardship

Helping asset managers exercise sound stewardship, shape the corporate behaviour of investee companies, and assess how effectively these efforts feed into investment research, portfolio construction, and risk management processes. Stewardship is especially key for passive managers and active managers with deviation constraints.

Disclosure

Ensuring disclosure of environmental risk management approach in a manner that is clear and meaningful to stakeholders, including existing and potential customers, covering quantitative metrics such as exposures to sectors with higher environmental risk.

ESG Integration Approaches

The ESG integration journey is different for every asset manager. Our experience tells us that there’s no one size fits all approach as nuances arise depending on factors such as size, asset class, geography, investment philosophy, operating models, and others. We outline the pros and cons of common approaches in a blog post here.

Why work with us?

We take pride in what we do – it’s our craft. Our approach is centred on years of experience helping large investment managers with a broad spectrum of strategic, operational, technical, and data-related challenges. We’ve partnered with over 30 large investment managers, with over 50% choosing to work with us again, and our work spans across APAC, North America, Europe, and Middle East.

Consistency is critical. Our structured approach leverages new technologies for execution – ensuring reliable engagement-specific workflows, and making certain that projects are managed with transparency, traceability, and full visibility into progress. We can be relied on to provide the uncompromising truth in advisory and excellence in delivery.

Get in touch...

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