ESG Trends & Impact Spotlight – August 2022

A Spotlight on ESG

Apex Group’s Environmental, Social, and Governance (“ESG”) newsletter aims to shine a spotlight on the examines the latest ESG trends and industry insights around sustainability. Our purpose is to drive positive change for a more sustainable future in our industry, and influence the flow of capital to the right places. ESG factors remain top priority, with pressure from investors, government bodies, employees and clients alike influencing investment rating criteria, regulatory developments, and corporate integrity, we want to reflect on and share the progress and innovations we see in the market to drive further impact across ESG factors.

Key Statistics

Our team has completed ESG evaluations for more than:

• 350 GPs and LPs
• 1,000+ portfolio companies
• 1m+ portfolio employees.

Key Takeaways

• There has been a recent significant increase in the number of managers using Apex Group’s carbon footprint and climate strategy services, particularly in the US. We will assess 100 portfolio companies in Q3 of this year alone.
• The number of clients now assessing all three scopes of emissions, beyond just Scope 1 and 2, in their portfolio companies is also increasing. 100% of Apex Group’s ESG clients (onboarded pre 2022) are expanding the scope of their assessments to cover all three scopes this year.
• 42% of private market assets under management are in funds with an active ESG policy. – Preqin’s ESG in Alternatives 2022 report

Top Industry Insights

A recent report from Preqin entitled “ESG in Alternatives 2022 – The Transparency Tipping Point” showed that ESG is growing as an investment strategy, together with the demand for better ESG transparency and informed change.

As the heat wave continues across the northern hemisphere, leaders are pushing to keep climate change at the top of political, economic and financial agendas. Discussions at the recent World Economic Forum in Davos, turned to how banks could use their financial clout to shift the world towards net zero production and consumption.

Moving towards net zero is a really pressing issue and Apex Group is a signatory of both the United Nation’s Principles of Responsible Investment and a member of the Net Zero Asset Managers initiative. While it’s clearly important for everyone to think about how net zero is financed, it’s so much harder to move from commitment to action. EY experts recently revealed “Four Steps Financial Institutions Can Take on the Path to Net Zero”, which is a handy reference tool.

Apex Group has been leading the way amongst financial services firms by offsetting its entire lifecycle of carbon emissions, but there’s still much more to be done to get everyone in the industry on board. Some firms are starting to provide clearer roadmaps towards achieving net zero but are under increasing scrutiny from stakeholders to tangibly commit to tracking all three Greenhouse Gas emissions scopes. By evaluating how these contribute towards a company’s carbon footprint, firms can devise realistic strategies that can be implemented and measured at a company level. That’s why the Apex ESG Carbon Footprint Assessment was created.

Case study

Apex Group client, Elysian Capital, shared their insights into why enhance ESG reporting and support is a vital part of their strategy. You can view this film here:

ESG regulations

In recent years, ESG factors have been pushed to the forefront of regulatory considerations. This quarter, we’ve seen ESG integration in UK capital markets by the FCA whereby stakeholders were asked their opinion on the following topics:

1. Issues related to green, social, sustainability and sustainability linked debt instruments (ESG labelled debt instruments), including:
2. Prospectus and ‘use of proceeds’ (UoP) bond frameworks
3. The role of verifiers and second party opinion (SPO) providers
4. ESG data and rating providers

As well as this, the Financial Stability Board invited comments on the consultative report, Supervisory and Regulatory Approaches to Climate-related Risks to assist supervisory and regulatory authorities in developing their approaches to monitor, manage and mitigate risks arising from climate change and, in particular, to promote consistent approaches across sectors and jurisdictions.

ESG regulations only further highlight the fundamental requirement of investors, public and private companies to ensure their business practices are ethical and driving positive change for the environment.

The Monetary Authority of Singapore has issued circular 02/2022 setting out guidelines further to the Code on Collective Investment Schemes and the Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations in their application to retail ESG funds, and the disclosure and reporting guidelines applicable to these funds.

On February 9, 2022, the Securities and Exchange Commission proposed a series of new rules under the Investment Advisers Act of 1940, as amended (“Advisers Act”) that would impose significant new regulatory requirements, obligations, and restrictions on private fund advisers.

Apex Group - ESG Activities

Apex Group is committed to driving positive change and inspiring the industry to act on ESG issues. The Group has recently undertaken its own ESG assessment, carbon footprint assessment and ESG Health Check to fully understand the current state of the business and formulate an action plan for future improvement. Apex Group’s dedicated Sustainability Committee and Equity, Equality, Diversity, and Inclusion Council are also ensuring employees can engage with initiatives and feel empowered to drive positive change.

CSR initiatives

This month, CBS released a ‘Innovators and Disruptors’ documentary with Apex Group Founder and CEO, Peter Hughes, and Chief Marketing and Communications Officer, Rosie Guest, to shine a light on the importance of financial services firms taking accountability when it comes to People and Planet. In the film, Peter and Rosie share how Apex Group are walking the walk with ESG; including offsetting its lifetime carbon emissions, launching a Women’s Accelerator Program, and introducing a new global mobility program, JUMP. Read more here.

We’ve recently partnered with The Greater Share Education Fund (“Greater Share”) a philanthropic fund that provides unrestricted funding to eight education focused NGOs that enact real, measurable change on children’s lives across the globe. As part of our partnership, we will be providing our single-source solution on a pro bono basis to Greater Share. Listen to our Single-Source Solution podcast where Peter Hughes again talks about the importance of giving back, our partnership with Greater Share and why it was crucial we were involved.

New ESG products

Apex Group will be holding our inaugural ESG impact month in September during which four new ESG products will be launched. More information will be shared in the next issue of this newsletter!

Expert Resources

Why not look at some of Apex Group’s recent ESG thought leadership insights, announcements, and podcasts:

• Engaging a Purpose Driven Audience panel discussion as part of Apex Group’s FS Disruptor Forum.
• Digital Assets Funds Webinar hosted alongside Seward & Kissel LLP.
• Podcast – Outlooks on ESG in the Middle East: Allen 7 Overy and Apex
• Expert Blog - Where next for ESG investing in the UAE
• Expert Blog - Riding the ESG debt wave and what it means for investors
• Expert Blog – US Family Offices face evolving risks
• Information on Apex Group’s sustainability partnership with Bermudian Olympic gold medalist, Flora Duffy
• News - two appointments to provide ESG Services to BGF and Octopus Investments Australia.

For more insight about Apex Group’s ESG Services or to speak with an expert, please contact us.