Daily ESG Briefing: ISS ESG launches data product to help investors align with labels and standards

The latest developments in sustainable finance

ISS ESG is to launch a product which will help investors align their portfolios with voluntary ESG labels and standards such as GreenFin, AFG, Nordic Swan, UNGC and Label SRI. According to the provider, the “diversity of approaches” taken by existing labels could make it “challenging” for asset owners to meet their requirements. The product, named ‘ISS ESG Labels & Standards Solutions', launches in February. The announcement did not mention whether the product will include the EU-backed Climate Benchmarks indices label or the EU Ecolabel, the latter currently in the middle of a protracted development. 

Australian super funds’ ethical options are reportedly outperforming their standard ‘balanced’ ones. According to research, reported in The Sydney Morning Herald, the typical “balanced ethical” option returned an average annualised compound return of 11.5% over the three years to the end of 2021, compared to 10.4% for typical regular “balanced” option. The figures from SuperRatings also showed “sustainable balanced” super options outperformed balanced ones over one and five years. Kirby Rappell, Executive Director at SuperRatings, said that in recent years there has been a “shift, with sustainable balanced options performing competitively relative to standard balanced options.”  

Assets in sustainable funds increased by 26% last year, as flows surpassed $600bn, according to data released by Morningstar. The US financial services giant also revealed that exchange traded funds (ETFs) attracted more net flows than traditional funds for the fourth year in a row. ETFs have had $5.2trn in flows over the past 10 years compared to traditional funds' $4.3trn. 

EU securities regulator ESMA is consulting on a requirement for financial firms to gather data regarding their client’s preferences for sustainable investment products and subsequently recommend products which meet those preferences. The proposals follow revisions to suitability requirements in the region under the MiFID II regulations. Stakeholders have until April 27 to provide feedback, with a final report expected to published by ESMA in Q3.  

Three quarters of real estate investors are using ESG data in their investment decisions, according to a new report from sustainability services firm Evora Global, with this figure rising to 97% for investors with more than $20bn in assets. The report, which questioned 121 real estate investors with a combined AUM of £2trn, found that 88% of large investors have conducted ESG materiality assessments on their investments, with 41% of all investors considering their approach to be market leading. At investors with more than $50bn in assets, a third of firms had ESG representation with voting rights on their investment committees, and a quarter had linked ESG incentives to pay or bonuses.