EY Paper: 10 ESG Challenges for Fund Boards
The financial services industry faces an uphill battle in integrating ESG strategies into business models and those challenges will affect fund boards as well, according to a white paper from EY. Among those challenges are the lack of generally accepted reporting standards; lack of quality ESG data, lack of compliance with evolving ESG-related laws and regulations; substandard ESG disclosures, among several others. The paper discusses these 10 major challenges that fund boards face and how they may adapt. For instance, EY writes that with respect to governance, fund boards will need “to validate that the portfolio managers use ESG data consistently in the investment decision-making process and that the fund builds ESG into the due diligence for major investments as necessary.” With respect to oversight of ESG, EY writes that boards are concerned that that they do not receive sufficient information on their fund’s ESG strategy, performance, and proxy-voting record, and that they do not apportion sufficient time to ESG issues when evaluating investment managers and other service providers. EY noted that fund boards will need to rectify these governance shortfalls. EY’s paper was partly informed by a webinar conducted with the Forum. The industry can expect to see regulation tilt toward ESG as the Biden Administration lays out its agenda. A recent article in Barron’s explored how the Trump Administration rolled back ESG initiatives at both the SEC and the DOL and how the tide could turn with the change of administrations.