4 Pointers To Develop and Expand an Elite Asset-management Sustainability Plan

The distinct value chain of asset management and private capital fund managers defines their customer base, KPIs, and culture. You therefore require a customized asset-management sustainability plan, as conventional corporate environmental, social, and governance (ESG) techniques designed for traditional service sectors are ineffective.

Because of the nature of their operations, these organizations require specially designed sustainability activities in order to draw in investment and provide substantial returns for shareholders, which in turn justifies additional investment. At a recent Impact Leaders Lab event, Apollo Global Management’s chief sustainability officer (CSO), Dave Stangis, discussed this strategy.

So how do you design a profitable, customized strategy to sustainability?

1. Create For The Worldwide Consumer

The majority of private capital fund managers deal with a customer base that is spread out geographically and operate on a global basis. Consequently, worldwide supervision is necessary for any sustainability function to remain abreast of the rapidly evolving regulatory landscape and its implications for the financial services industry.

Global laws are rapidly expanding, impacting fund managers by reshaping their investment portfolios and adding new reporting obligations. These include the Sustainable Finance Disclosures Regulation (SFDR) of the European Union and the proposed ESG-related regulations from the Securities and Exchange Commission of the United States.

The sustainability team will require in-house knowledge to fulfill their own legal requirements and counsel global clients across many regions regarding potential impacts on their investments.

2. Establish A Center of Excellence Within

Private capital players are unlikely to be well-suited for generalist ESG practitioners.

Rather, in order to fill specific roles inside the company, sustainability executives must use a surgical approach to finding the right personnel from pools of talent that are differentiated from one another.

They must locate experts in climate accounting, law, and strategy in addition to those who can adapt to particular market demands, such the expanding significance of sustainability in credit risk.

By establishing an internal center of excellence, this strategy gives businesses a competitive advantage. According to Stangis, this is the situation at Apollo.

3. Harmonize ESG With Business Goals

Private capital businesses have a unique opportunity to both accelerate their progress toward economic objectives and function as a catalyst for sustainable development. With median returns of 12.6 percent in 2023, sustainable equity funds outpaced traditional asset classes.

Promote worldwide alliances and a collaborative culture in place of a separate sustainability function. Determine how sustainability might enhance social and environmental impact while advancing current company objectives.

Make sure that, in order to improve financial results, sustainability teams collaborate closely with various business divisions to integrate ESG risks and opportunities into the core investing process.

4. Join The Dots

Make sure that there are interconnected management systems in place in order to increase the reach of sustainability measures inside private capital. Make sure, for instance, that the board is putting clear, scalable governance standards into practice. Create comprehensive systems that collect and disseminate data so that investors can develop actionable insights.

This strategy also applies to company culture and personnel management. Regardless of the team a person joins, it’s critical to instill an ESG-focused attitude in them from the moment they join a business.

For instance, Stangis includes pertinent information in employee orientation materials and personally writes a note to each new worker within the first month of employment at Apollo. Additionally, he offers Zoom conversations to anyone who wants to learn more about climate reporting, credit methods, carbon offsets, and how these relate to their work.

Developing a sustainable asset-management plan might be challenging for CSOs. However, integrating ESG into a business in the correct way can be advantageous from a business standpoint as well as advantageous.