The three-year ESG ‘super factors’ initiative known as Project Delphi is aiming to be the “standard framework” for the industry, according to the global chief investment officer of project backer State Street Global Advisors (SSGA).
“A team of asset managers, asset owners and external analysts are working together to zero in on key ESG factors and metrics and build a standard framework for the investment community,” said Rick Lacaille.
He said the framework – whose final report is set for release in mid-2014 – could be used not only within SSGA itself but at the State Street Global Exchange trading, research and data arm that was launched last year.
“We can even play a role in helping clients apply it across their portfolio screens,” he added.
Project Delphi is a major collaborative project to come up with a framework of environmental, social and governance (ESG) ‘super factors’ (RI coverage). It has brought together nearly 50 players in the investment community (asset managers, sell-side, asset owners, consultants, federations and academics) to develop a framework to help guide investors and corporations when making their investment decisions.
SSGA says that while the findings are “not yet influencing our own approach to ESG investments, we expect that they will in the future”.
“The factors could be wholly or individually integrated into our research efforts or supplement the third-party research we employ in our ESG investment products,” the firm says in its new Corporate Responsibility Report.Participants in the project, overseen by Lacaille, have included AXA IM, Aberdeen Asset Management, F&C, APG, KLP, Nestlé, the Dutch central bank, Towers Watson, Hymans Robertson, BofA Merrill Lynch, Schroders, Pension Protection Fund, KKR, Mercer Consultants, Storebrand, PGGM and ECPI.
Its part of a broader review called “Valuing Non-Financial Performance” under the auspices of CSR Europe, the European business network, and ABIS [formerly EABIS], the Academy of Business in Society,
Project Delphi itself has three work-streams: a European investor group led by Chris McKnett, Head of ESG at SSGA; a metrics team led by Ralph Frank, Managing Director with DVFA, the Society of Investment Professionals in Germany; and a panel of European institutional investors led by Railpen Investments’ Head of Governance Frank Curtiss.
State Street went on to say that 9% of its total assets under management are now ESG investments – $203.7bn out of $2.3trn, mostly screened funds in separately held accounts. That’s up from 5% of total assets in 2007.
“Anecdotally, we’re seeing an increase in clients moving from negative screening for “bad” companies that they want to avoid, toward positive screening for “good” companies to target,” the Boston-based company says. It’s also seeing more clients interested in applying ESG screens: “Both represent slow but steady shifts toward environmental and social investing.”