The Feb 13th 2019 Trends Investment Summit

The objective of this event was to connect investment professionals with Asset Management firms and present key topics and investment trends.

And, of course, as reference actor in the sector, DynaFin was present.

Two major changes in the markets that will impact the Asset and Investment Management Industry retained our attention. The first one is about Social Responsible Investment (SRI) and the second one is linked to Data. They both represent not only a challenge but also an opportunity for the actors in the sector.

SRI: a greater take-up by investors and investment firms

SRI? Nothing new you will say… Indeed…

But, led by millennials, individual investors are more and more interested in investing in companies that generate social and environmental impact in society. And, in order to develop products that satisfy their clients, firms more and more consider the ESG (Environmental, Social and Governance) dimension. In other words, they use ESG criteria to evaluate the performance of companies listed on Capital Markets relating to economic, social and Gouvernance aspects.

The BEAMA (Belgian Asset Management Association) shared its report about the Belgian Fund Market. They highlighted that the market share grew up from 6,29% to 10,90%.

The SRI landscape already exists but, as any green economy (clean tech, green energy, electric cars …), it should be considered as a moving sector that pushes the companies to transform their business model.

Hence, SRI is not new in the market but a “Paradigm Shift” is happening now!

Some key facts:

• Last year, the High-Level Group on Sustainable Finance released a report with 8 strategic recommendations about how to put in place a more sustainable oriented financial system.
• FEBELFIN has introduced an SRI label for investments and savings: products that are promoted are focused on people, environment and sustainable business. FEBELFIN has created a website listing the « sustainable » products : www.sustainablesavingandinvesting.be

Quite interesting, isn’t it?

Data Governance challenge: the new forefront of the data revolution

Besides the SRI “paradigm shift”, another subject linked to SRI was highlighted: the use of external data in the ESG screening.

Renault has been taken as example to show how important is the use of external data. While Renault is going through a governance crisis, its rating, used in investment models, remains unchanged. When analysing Renault’s governance issue, you will easily get that its rating does not reflect its situation anymore and should be excluded from SRI funds.

It becomes obvious that fund managers must pay more attention to the quality of data they use in their investments process. They need to assess the quality and relevance of the data with regard to the ESG elements, although it fits in their internal models.

The challenge for investment firms is here to adapt the data management processes and tools to keep their investments in line with their objectives. Running financial and sustainability models requires not only specific data but also data quality controls that allow to quickly react to markets events, like reviewing the part of investments in companies that do not comply with the ESG criteria anymore.

Did you get it? This is called “Data Governance”.

Do you want to know more about SRI and/or data governance? We would be happy to assist you in getting the right support on that subject.

Alain Mugwaneza, Expert in Data @ DynaFin Consulting.