As ESG factors play an increasingly central role in investment strategy, financial institutions are grappling with how to assess their impact effectively.
Traditional return-based metrics alone no longer suffice in a market that now demands accountability not just for profits, but for how those profits are made. This shift reflects a deeper understanding that sustainable practices and responsible governance are not just ethical imperatives but financial ones too.
Many investors and asset managers have begun to integrate ESG considerations into their decision-making processes. However, a consistent and reliable method for attributing ESG performance remains elusive. This absence of standardisation makes it difficult to assess how individual investment decisions contribute to ESG outcomes, leaving a critical gap in performance evaluation frameworks.
To help close this gap, a new ESG attribution model has been developed in partnership between WealthTech company Ortec Finance and MN, a prominent fiduciary asset manager based in the Netherlands. The model aims to bring structure and clarity to ESG performance measurement.
A recent webinar recording provides insights into this approach. Led by Sam Radford and investment performance consultant Tim Campbell, the session breaks down the ESG attribution model and its key distinctions from traditional methods.
The discussion covers essential components such as how to develop benchmarks that accurately reflect ESG objectives, and what types of non-financial data are most appropriate for attribution purposes. Using a hypothetical portfolio, the presenters demonstrate how combining ESG indicators with traditional financial metrics can yield actionable insights for both compliance and performance evaluation.
The webinar also addresses the practical challenges involved in implementing ESG attribution, including data quality, availability, and the influence of external factors like inflation.
For more information, the webinar can be watched here.
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