With the growing prominence of environmental, social and governance (ESG) investing, much has been made of the need for firms to provide details or fear being tainted with the ‘greenwashing’ label. KBI Global Investors (KBIGI) is able to quantify their investments' sustainability ratings using revenue alignment SDG scores (RASS), based on the UN’s sustainable goals template.
Geoff Blake (pictured), Head of Business Development & Client Service at KBIGI, told Fundeye a bit of the background to RASS. He said: “We have a long history going back to the start of the firm of sustainable investing. These funds started around solving the problems of providing enough clean water, food, energy and so on for the planet. Our companies have always been providing solutions. We’re delighted now to be able to have to RASS percentages to enhance our credentials as not greenwashing.”
This sounds great and well suited to an increasingly sceptical investor base when it comes to firms’ ESG claims. A lot has been said of the lack of a standardised form of ESG reporting, although Mr Blake considers the UN’s SDG ‘will be the standard’ as it goes some way to ‘bringing consistency in the industry’.
While some bemoan the lack of mandatory ESG reporting by companies, KBIGI doesn’t rely on its holdings to provide the data themselves, rather just the raw revenue figures which are easily verifiable.
“We’re using the revenue information to make the link between SDGs, we’re not asking the companies to report or how their revenue impacts SDGs, we’re doing that work ourselves based on the revenue streams broken down into different company activities as we call them. Then we align the activities to SDGs.”
This sounds like a lengthy, capital intensive process and it was, to begin with. Mr Blake told Fundeye that getting the system up to speed took almost two years but is now easy to replicate. He said that 2020’s RASS scores should be coming soon.
What happens if a company’s score is not what it should be? The companies chosen for the portfolios are all involved in trying to boost sustainability but if one of its activities is deemed ‘negative’ this is not necessarily the end of the matter.
“We sit down with the companies each year and look through the numbers deciding whether they’re positive neutral or negative and it can lead to a debate about whether it should be thus rated. It leads us to engage with the company about whether they’re doing something positive or not so it can be quite a powerful exercise, to go back to the company and talk about issues,” Mr Blake explains. One of the outcomes could be a change to KBIGI’s size of holding in whichever company they’re speaking to.
KBIGI was given a huge boost a few years ago with its tie-up with Amundi, Europe’s largest asset manager. The Ireland-based firm now enjoys the use of Amundi’s mighty distribution network across Europe and Asia, although works independently in the US and Canada.
In terms of where the firm is seeing large inflows into its RASS products, Mr Blake is specific. He said that there is strong interest from large one time transfers of wealth among ultra-high net worth clients ‘looking to invest in more impact strategies’. Nice business if you can get it indeed.
