Published by: Global Trading|2nd September 2020
By Rebecca Healey, Co-Chair EMEA Regional Committee & EMEA Regulatory Subcommittee, FIX Trading Community

ESG is no longer a fringe concept. A year ago it was highlighted that more than 70% of investment firms had a commitment to incorporate ESG across all investment products – the rising pandemic along with the Black Lives Matter movement is propelling not only the E but also the S and the G now into mainstream investing; global ESG funds saw their highest inflows on record in July¹. Moving ESG from a stand-alone niche product to centre stage in the investment will create challenges but also offers opportunity for the industry. From changes in research consumption to shifts in liquidity formation, as sectors fall in or out of favour; as well as the need for increased governance to avoid rising regulatory concern over greenwashing — data to monitor, effectively risk assess benchmark and reporting ESG will be critical to the industry’s future success.

The recent campaign by Richard Curtis – “Make My Money Matter”² raises the scale of the challenge. There is £3 trillion invested in UK pension funds alone, and while end investors can choose where to invest, there is not yet the capacity in ethical funds to house all pension money. Managing the transition into sustainable finance will require a change in approach to investments through the digitisation of the investment process itself. Simply because investments are ethical doesn’t mean that the underlying companies are outperforming the norm. While ethical funds have outperformed in the downturn, this may not be based on the performance of these companies, but rather on a supply and demand boost where interest in the companies is inflating their value, which will correct itself in time.

Take the recent case of Wirecard – according to Bloomberg, 10 out of 25 analysts covering Wirecard had buy ratings on the stock as late as 18 June, the day auditors revealed that €1.9bn was missing from the firm’s balance sheet. In addition, Moral Money claims that before its collapse, Wirecard earned median-grade ESG ratings from MSCI and Sustainalytics, but not from all data providers. The myriad of conflicting ratings didn’t prevent Wirecard from being selected by some large ESG exchange traded funds which incurred losses as a result. As it stands today ESG ratings can be very subjective and there is a risk in just taking the base level rating rather than seeing it in context and conducting full due diligence – the G of ESG.

There is a legitimate argument that there can be no one-size fits all ESG strategy, however information overload will make it challenging, if not impossible, to read through the noise and hone in on what matters. Sustainable investing requires a variety of criteria to be taken into consideration ahead of an investment decision. To facilitate greater adoption of ESG in mainstream investments, new specialist research, data and analytics offerings are emerging to provide improved means of aggregating and quantifying information to identify future successful ESG and RI investments.

With Covid-19 hastening widespread adoption of ESG, the challenge for asset managers is not only the complexity of ESG as an investment strategy, but the increasing possibility of conflicting regulation. The SEC plans to lead on disclosure of ESG—“If the SEC does not take the lead, it is highly likely that other jurisdictions will impose standards in the next few years that US Issuers will be bound to follow³.” The European Commission is also implementing a new regulatory framework and taxonomy to ensure climate and environmental risks are fully managed and integrated into the financial system⁴. In APAC, regulators have produced a stewardship code and third-party conformity assessments on green funds⁵, all of which suggests future challenges for global firms planning to adhere to multiple regulators in an already evolving and complex landscape. If the issue in the past has been on the scarcity and collation of accurate data to extract value, managing this with rising investor interest, as well as, a conflicting global regulatory framework makes it critical for the industry to come together to assess what is required and how to best to deliver sufficient global standards to cover the different methodologies of ESG.

The FIX Trading Community, as an industry standards association, plans to take a key role in fostering the debate to ensure improved standardisation of ESG data and to propose industry best practices to incorporate that data. To that end, join us for the virtual debate on 18th September “ESG is No a longer a Fringe Concept” – Sustainable Investing Post COVID-19 – What is the impact on Asset Management?

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London, New York, Hong Kong, 9th July 2020: FIX Trading Community, the non-profit, industry-driven standards body at the heart of global financial trading, announced today that the annual EMEA Trading Conference scheduled for the 18^th of September 2020 will be delivered in an immersive virtual format.

During these challenging times with respect to COVID-19, the safety of our community members is of the utmost importance. For this reason, whilst we are sad that the event cannot be delivered in its usual format, we are excited by the technology that will help deliver the strongest and one of the best conferences possible and the ability to reach a truly global audience.

1. Delivering the essential debate – At a time of significant potential change for the industry, at precisely the point when the ability to meet & debate the key issues has been severely disrupted, the FIX EMEA Trading Conference is going virtual and global – delivering the first event of its kind for the industry.
2. Created by the industry for the industry – FIX as a non-commercial conference can focus on solving the industry’s challenges through delivering high quality focused content and debate by subject matter experts, harnessing broad industry participation with support from the leading trade associations.
3. Beyond Zoom – Leveraging the latest technology, FIX will deliver a fully virtual mixed media conference facilitating a fully interactive and immersive virtual debate – an industry first.
4. Expanding the debate across the globe – FIX as the global standards trade association regularly engages the industry in the regulatory debate, this is evident in the seniority and global nature of the contributors to the event.
5. Harnessing technology to optimise client interaction and showcase innovation – A full-day, two stream agenda with live streamed mixed media broadcast delivering a combination of engaging and interactive panel sessions, webinars and additional on demand content. A virtual networking lounge allowing to chat with other attendees and a virtual exhibition hall enabling delegates to explore and connect with sponsors, offering one on one meetings, live chat and product demos.
6. Overcoming the challenge – this is what FIX does best fostering industry engagement and togetherness in a collaborative manner leaves a better outcome for all participants from the Buy Sides, Sell Side, Venues, Exchanges, Trade Associations, Regulators and Policy Makers across global jurisdictions.

Rebecca Healey, Co-Chair of the EMEA Regional Committee & EMEA Regulatory Subcommittee, FIX Trading Community commented, “From COVID-19 to ESG, implementing regulatory change is increasingly a global requirement.  FIX EMEA going virtual and going global creates the opportunity for the first conference of its kind in the industry.”

Matthew Coupe, Co-Chair EMEA Regional Committee & EMEA Regulatory Subcommittee, FIX Trading Community, noted, “By leveraging technology, it has created innovative solutions to deliver the FIX EMEA Trading Conference. The industry needs to come together to interact and contribute to valuable discussions to confront the biggest challenges facing the industry today. Though we may not be there in person, we can still facilitate this important debate.”

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About FIX Trading Community

FIX Trading Community is the non-profit, industry-driven standards body at the heart of global trading.

The organisation is independent and neutral, dedicated to addressing real business and regulatory issues impacting multi-asset trading in global markets through standardisation, delivering operational efficiency, increased transparency, and reduced costs and risks for all market participants. Central to FIX Trading Community’s work is the continuous development and promotion of the FIX family of standards, including the core FIX Protocol messaging language, which has revolutionised the trading environment and has successfully become the way the world trades.  Visit www.fixtrading.org  for more information.