Member Sign In | Not a member? Register Now
Page 2 - What’s the future for ESG broker research?
research would have averted these crises – other remedies are required to resolve those problems – but investors would have been better prepared to deal with the implications over a longer-term horizon.” One of the EAI’s major drivers was that it put hard money at the heart of its push for better ESG research. Investors promised a 5% cut of commissions to recommended brokers. This was an important signal to management at investment banks that SRI research was worth backing. Indeed, according to a report put together by OnValues, the Zurich based research firm on behalf of the EAI, members of the initiative actually paid 11% of commissions for ESG research as of June 2008. Marcel Jeucken, head of responsible investment at PGGM Investments, a founder member of the EAI, said that incentive signal had now officially ended with the dissolution of EAI. Encouragingly, a number of asset managers present gave clear support for continuing to pay commissions as before. In its place, the PRI hopes to open research to a much broader base of potential clients with the creation of a research database of ESG reports produced by brokers and fund managers. The PRI said the database, which will be free to signatories, is expected to be fully operational in spring 2009 following a test period by investors. It said the database would “incentivise” banks to produce so-called extra-financial analysis via the lure of archiving it for promotion to the PRI’s membership, which now represents assets of about $18 trillion. An independent working group will moderate the content from research providers to ensure it is specifically ‘material’ to investors and eligible for posting. While the PRI database is still very much work in progress, brokers have yet to warm to the idea.
At the EAI Paris meeting, Stéphane Voisin, head of sustainable and responsible investment for Crédit Agricole Cheuvreux, said it was unlikely that brokers would upload relevant research because it would flout their sales model. He said brokers would prefer to target their research to certain clients and not others and that most knew their potential client base already. Valéry Lucas-Leclin, co-head of SRI research at Société Générale, raised concerns about the database becoming a ‘dumping ground’ for information that could, as a result, devalue good ESG research. Eric Borremans, head of sustainable and responsible investments at BNP Paribas Asset Management, said in response that it was accepted that much of the broker research would be a ‘shop window’ rather than actual product. Nonetheless, he said he believed the database held great potential for SRI research to reach a much broader audience. Other brokers told Responsible Investor they thought the initiative badly timed, coming at a moment when the value of SRI teams was potentially high on management cost-cutting agendas. These concerns are important and will be tricky to resolve. When measured against some of the other interesting findings of the OnValues report, they suggest investors could be at a crossroads regarding what they want to see from their research providers. The report noted that environmental issues had seen the greatest proliferation of research since the launch of the EAI in 2004, particularly in more quantifiable areas such as emissions trading. However, notable gaps in coverage, it said, included governance research, which despite progressing in quantity and quality was still “greatly under-covered relative to its importance.” In addition, coverage of social issues was
« Previous | Page 2 of 3 | Next »