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| | Call to take ESG seriously in emerging markets Environmental, social and governance (ESG) considerations continue to dominate the news agenda, but unusually this week we hear criticism from a fund manager that investee companies are not taking sustainability seriously enough.
Dragon Capital, which runs Vietnam’s largest and oldest asset fund the Vietnam Enterprise Investment Limited (VEIL), says a lack of ESG awareness from local businesses and companies in frontier and emerging markets is creating challenges for sustainable investors in these regions.
VEIL Portfolio Manager Dien Vu says this lack of awareness is exacerbated by weak enforcement.
VEIL’s views are supported by a PwC survey from 2022 that finds that just 24 per cent of Vietnamese businesses possess a clear governing structure; 26 per cent have strong ESG risk metrics to monitor progress; and 70 per cent have none or very limited ESG reporting.
Dien Vu argues that it is incumbent on institutional investors to improve ESG practices among investee companies, and gives examples where VEIL has intervened to "promote positive change".
However, if the issues extend across the emerging and frontier markets, as Dragon points out, investors are going to have a monumental task ahead of them if there are really going to make a difference, particularly in the timescales needed to make a meaningful difference to climate change.
Elsewhere companies are warning that traders in the US may fail to meet next Monday’s deadline for completing securities trades withing one day.
The move to the so-called T+1 settlement cycle is looking far from seamless, according to consultancies SIX Group and Taskize.
René Haag, Regional Head Securities Service America at SIX Group, tells us that unlike the move from T+3 to T+2 back in 2017, firms have had little time to prepare and could well find themselves on the wrong side of the regulator.
"There is virtually no room to resolve any exceptions during the settlement cycle, meaning that firms will need to urgently assess whether they’re truly ready," Haag says.
In Asia-Pacific life gets even more complicated with a switch to T+1 given the time differences between the regions.
Lukas Conrad, Regional Head Securities Services in APAC for SIX Group, says: "Market participants in APAC face an uphill battle with the US transition to T+1 as the difference in time zone means that operations teams only have a few hours to clarify failed trades. With this, the need to have servicing capabilities in the region is crucial."
But given the 28 May is days away, if firms aren’t ready now it looks likely they will fall short of the deadline.
And if they aren’t busy enough with getting settlement cycles up to speed, we also hear that financial services firms are falling short on cybersecurity.
Crestbridge Alternative Managers Mood Index survey finds investors are worried about fund managers falling short on cybersecurity, particularly during fundraising.
Crestbridge says that with an increasing reliance on digital systems and the rapid pace of technological innovation, the industry is left wide open to various cyber threats such as data breaches, ransomware attacks and phishing scams.
Time to revisit best practice and put suitable safety measures in place.
Gill Wadsworth, Editor
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| | | | | | Survey reveals 71% of asset managers dealt with institutional investor concerns around cybersecurity in 2022 |
In a recent Crestbridge Alternative Managers’ Mood Index (CAMMI) survey, results highlighted the growing concern of investors in cybersecurity during the fundraising due diligence process in the fund management industry. The firm writes that the increasing reliance on digital systems and the rapid pace of technological innovation leaves the industry open to various cyber threats such as data breaches, ransomware attacks and phishing scams. |
| | | | Countdown to T+1 | | From 28 May the trade settlement cycle moves from T+2 to T+1, meaning pretty much all market participants in the US must settle trades within one day or face the wrath of the financial regulator. |
| | | | | | | | | | | | | | | Fixed Income: Fundamentals and the Fed Natalie Trevithick, Director and Head of Investment-Grade Credit, Payden & Rygel, writes that the major macro trends that the market is currently focused on are primarily inflation, the employment picture, and US gross domestic product. |
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