Climate Risk has turned Code Red and the risks of not implementing changes to achieve Net-Zero can be disastrous. Environmental, Social Governance and Sustainable investments to reduce carbon footprint and meet the 2050 goals are driving huge shifts in investments.
UN’s 17 Sustainability Goals for worldwide improvements in multiple aspects of human life are being factored in by Institutional Investors like Pensions, Endowments, Family Offices, Consultants and Fund of Hedge Funds in their investments.
Though the Physical risks and transition risks facing the markets are high, there are also rewarding opportunities in the huge shifts in technology and sustainable processes that are likely to happen over the next 10 years.
Funds and fund managers need to identify and validate their ESG investments through a continuous process of proper governance, risk management and due diligence, to ensure the risks are identified early and managed well to prevent risks to their investments.
Regulators and Investors worry about Greenwashing
As ESG investments increase firms face rapid changes that climate risk could impose on them. Replacement of their current carbon intense products, use of renewable energy, improving water usage, mobility, bringing out new green products to the market, adjusting to supply chain risks, reorganizing supply chain to low carbon footprints, improving social accountability are part of the change. Oversight on compensations, ensuring circular economy for reduce, recycle, reuse, protections for fair wages and fair rights, preventing risks to biodiversity are some of the many processes. Ensuring early identification of risks through well organized data management and monitoring can prevent violations and protect investments
Investments in ESG rated funds have become a Trillion $ market. Regulatory disclosures standards like Corporate Sustainability Report (CSR), Sustainable Finance Disclosure Reporting (SFDR), Global Reporting Initiative (GRI), Sustainable Accounting Standards Board (SASB), Task Force for Climate Disclosure (TCFD) can help investors see the material risks in their investments. Regulators see Green washing as a big risk. Having an auditable processes and data to substantiate the investment process has become necessary
You need a single source of truth of violations and identify risks as early as they occur so you can take corrective action and reduce cost of mitigation.
You need to have a seamless process to manage and implement governance, risk and compliance management across departments, locations, lines of business, user groups in an business as usual way.
You need a system that provides information to all levels in a way that is actionable, be it the departmental staff, the senior management or board from a single source of truth.
You need a cloud based solution that is easy to implement that adapts to organizational process without large capital expenses
How Can GRACE help you implement your ESG and Sustainability processes
GRACE is a web based / tablet enabled Mobile system that can help establish the ESG process for Governance, Risk Management, Due Diligence and Disclosures management by helping you gather all the data in a central data repository, making it easy to gather, retrieve, review and disclose from any where any time
Forms, workflows, calendars, online portals, risk ratings and dashboards can help creating a single source of truth for data and allow collaboration between fund managers, funds, supply chains and service provider entities to gather information easily, share for reviews, record risks and see patterns of risks so mitigation actions can be undertaken early as well as verifiable disclosures may be provided to investors on their invested portfolios.
Comprehensive checklists will enable looking at all aspects of ESG due diligence for each organization being considered for initial due diligence, site visits and ongoing monitoring. On line questionnaires can be shared with funds to gather the information and findings can be analysed in an easy way.Work assignments and responsibilities can help you manage and track each investment and match it against investor goals, see the portfolio and material risk shifts as they happen.
GRACE ESG for Ongoing Due Diligence, Risk Management and Disclosures
Single Data repository for all your information to manage your UNPRI, SFDR, TCFD and other disclosure obligations
Establish the Governance Processes for the Investment Management Process
GRACE helps establishing ESG policies and procedures, Roles and responsibilities, attestations, training and Risks and oversight Committee management, ESG goals and statusreporting
Offers Online Portal for Funds, Invested companies to report
GRACE offers Online Portal for Funds, Vendors, Counter parties, Background check Third Party agencies and others to reply back to information requests from the due diligence teams.
GRACE will send alerts to them when information requests are made and alert to the due diligence owner when information is received back
Manage Investor Information
GRACE helps keeping track of investor goals, guidelines, and restrictions along with their investments, redemptions and compliants as well to share disclosures with them
ESG Due Diligence questionnaires
Standardized questionnaires based on industry frameworks UNPRI, SFDR etc. can be setup and managed on GRACE
Site Visits and Stewardship
Stewardships and Site visits are an important component of due diligence done by actually meeting people and verifying internal ESG and other processes,service providers, compliance, fund administrators and ensuring that the information provided by the firm matches their actual actions as well as help with mid-course corrections and Stewardships to help the firms to help meet the investment goals.
GRACE allows you to set up Site visit plans, inherit from the standard site visit checklist and update it with additional items and checks that would be fine tuned to the particular visit.
With its tablet / mobile interface, you can invoke the checklist during the visit and enter the findings right into the system during the due diligence exercise so as to capture all the information received. Findings can be analysed, risk rated and reviewed to get a picture of the organization
Initial Due Diligence Data gathering and Analysis
You can record all the information gathered from and about the firm into the central repository. Each firm can be sent online questionnaires for ESG Due diligence and data can be gathered including supporting documents in an easy, flexible and comprehensive way.
Findings and documents received including from vendors, services providers and third parties like fraud investigation, background checks, legal due diligence, counter parties etc. can be included in the findings.
Analysis of findings to record risk levels of each information gathered can help you arrive at a risk score for each firm and be able to compare organizations based on their risk scores.
Investment Reviews can be conducted from this single source to arrive at the selection / rejection with record of selection / rejection reasons.asons.
Data Load Functions
GRACE can offer functions for uploading up Financial Statements, Auditor Comments, NAV and other reporting information that the funds, portfolio companies may be giving you in excel formats.
GRACE provides both data load and data entry functions to facilitate the data to be brought into the system
Ongoing Data Gathering, Due Diligence and Monitoring
GRACE provides functionality for ongoing monitoring of the firms and ESG data in the portfolio.
It offers calendaring facility and set up for ongoing monitoring items to be set up on each firm. These could be onetime or recurring tasks. Each event can also be assigned to task owners on whose individual calendars these task would show up. The system will also provide alerts on due dates to the task owners for their follow up with the firm , counter parties and vendors.
The task owner can gather data including information and documents and add them to the GRACE system against the check and highlight any risks seen while recording
GRACE can help set up committees, assign responsibilites, coordinate attestation of responsibilities, manage meetings, action items and assign responsibilities for tasks and task managment reporting
GRACE can help manage disclosures, their reviews and release process. GRACE can also help sending the latest disclosures to investors in a timely manner.
Analytics and Report Generation
GRACE with its single source of truth can provide easy to use analytics on Material Risks and Metrics as per SFDR on each fund in the Portfolio. It can also show data on trends in each of the aspects of ESG over periods of time to see they show positive or negative trends towards meeting the goals
Investors goals and the portfolio trends to meet the investor goals can also be seen
Risk trends on vendors, counter parties and the organization’s exposures can be seen quickly
Risk reports, data calendars, due diligence status, ongoing calendars, firms in the portfolio that are not providing proper reporting can be seen for followup.
The analytics, charting and drill downs together give you a complete picture of state of each investment for early migitation of risks.
GRACE ESG Dashboard is a powerful tool that allows the organization to get latest information on the prospective and current portfolio firms. Slice and dice by firm type,strategy, geography, fund currency, fund country, status of selection, by active firms, suspended firms, rejected firms along with drill down on the complete history of all data and documents on the firm until date provides valuable information. Data on site visits, risks identified, risk trends seen from ongoing data gathering, audit data from the single source makes it easy for zeroing on challenges with the firm right away.
Investment committees and Risk Committees can review all this information from the same single source of truth on a real-time basis to map them to investment goals and help can suggest mid-course corrections where needed
The Value GRACE can bring to your ESG management process
Cloud based, Scalable, Secure, Centrally managed ESG management of investments from Anywhere Anytime
Help Meet ESG Goals through Visibile and Transparent processes and prevents green washing
Establishing the process through GRACE can ensure helps meet ESG goals comprehensively and is meet the defined ESG standards and greenwashing is prevented
Tablet enabled, Mobile enabled system facilitates information availability and data capture at source
This feature enables the due diligence team to be empowered to have information on hand as soon as they need it, to refer back and look at previous interactions with the firm and ask the right questions
Online Portals for Diligence Process can help gather information for investments easily
By offering Online portals and keeping in continous touch with funds and companies, firms where investments are being made can be comprehensively analysed for their strengths and weaknesses in their ESG processes. Mitigation actions can be taken early to help them meet their ESG defined goals through stewardship and other mechanisms to prevent failures.
Risk reporting becomes Online and Real time
With an integrated web based access anytime anywhere, there is no need for risk reports to be generated in various departments to present to senior management. All that effort, costs and time can be saved.
Risk and Investment Committees get their information without delays
By having a single source of truth for analysis and risk oversight , investment and risk committees can make informed decisions
Organization Ownership of Data
Organizations suffer when key risk and compliance staff leaves. The information is scattered if maintained solely by individuals and are lying on disks in various forms. GRACE becomes the single central repository of documents, data and processes enabling continuity even when key people leave the organization
Early awareness of Risk Trends
Trends of risk in various firms where you have investments, their vendors and counter parties can be very quickly identified with visual analytics , dashboards and drill downs and risk mitigation steps can be taken early
Assured Auditable source of data for Disclosures
Information on each investment is auditable and progress seen in meeting goals can be verified. Material risks in in portfolio can be used to help the firms manage their climate and sustainability risks. Disclosures to investors will be from verifiable data and will help build assurance and competitive advantage with investors.
Single Source of Truth for the Organization
Will all documents, data, reviews, audit trails, analytics and easy to use queries and reports, GRACE becomes the central repository of the Single Source of Truth for the organization and avoids duplication and inefficiencies from trying to find out the latest information.
Disclosures to investors and regulators can be managed from Single source of truth
Enormous costs savings in unwanted labor for audits and examinations, avoid regulatory fines, legal costs, reputation risks can be gained by verifiable disclosures being created from the single source of truth
Complete Source of information : https://www.klgates.com/SEC-Proposes-Cybersecurity-Risk-Management-Rules-for-Investment-Advisers-and-Funds-3-9-2022. All Language quoted and attributed to the article On 9 February 2022, the U.S....
All information Quoted from the article https://us.eversheds-sutherland.com/NewsCommentary/Press-Releases/249220/Annual-Eversheds-Sutherland-Analysis-of-FINRA-Disciplinary-Actions-Shows-Huge-Surge-in-Financial-Sanctions?utm_source=vuture&utm_medium=email&utm_campaign=vuture-emails March 8, 2022 Eversheds Sutherland has completed its annual study of the disciplinary actions reported...
https://www.occ.gov/publications-and-resources/publications/semiannual-risk-perspective/files/pub-semiannual-risk-perspective-fall-2021.pdf All information here is quoted from the article. Please refer to it from the complete article The OCC is...
Key Highlights from the OCC’s Risk Alert on Dec 12th 2021 https://www.occ.gov/publications-and-resources/publications/semiannual-risk-perspective/files/pub-semiannual-risk-perspective-fall-2021.pdf All information quoted here is from the OCC...
https://www.sec.gov/files/exams-registered-investment-company-risk-alert.pdf SEC Risk Alert of October 26, 2021 Observations from Examinations in the Registered Investment Company Initiatives* All notes below...
https://www.linkedin.com/posts/la-meer-associates_empower-your-organization-to-comply-activity-6727625980141281280-9sl4 Please join us for a webinar on “Empower Your Organization to Comply” on Nov 12th 2020 at 11 am...