The Swiss Association for Quality and Management Systems (SQS) has partnered with Contrast Capital to create the first assurance standard on the quality of responsible investment (RI) processes. The new standard, called “Sustainable Investing Management System” (SIMS), has been developed based on the ISO 9001 standard, the world’s foremost assurance standard for quality of management systems. It is adapted to the specifics of responsible investment, with a particular focus on the integration of ESG issues in mainstream investment processes.
Assurance builds trust
The launch of this new standard aims to increase the level of reliability and confidence in the industry, particularly for asset owners looking for asset managers with RI capabilities. SIMS fills a gap in the market in its unique focus on providing quality assurance of investment processes, rather than quality of disclosure (e.g. assurance of RI reports) or portfolio characteristics (e.g. green products labels). It answers recent calls from UNPRI signatories for greater accountability and from the European Union’s High Level Expert Group on Sustainable Finance on the development of official European sustainability standards and labels.
It focuses on continuous improvement
SIMS is designed to help institutions managing assets to ensure that the way they implement responsible investment follows the principles of a Quality Management System (QMS) as outlined in the ISO 9001:2015 standard. This includes a strong customer focus, commitment from top management, effective planning and resource allocation, and a consistent process. The ISO 9001 standard is based on the idea of continuous improvement, so it can be useful and relevant for all asset managers, irrespective of where they are in their RI journey and what their current objectives are. Rather than being prescriptive, SIMS seeks to ensure that organisations achieve good practices in responsible investment incrementally but systematically, that processes are robust and repeatable, resources appropriate, and that areas for improvements are identified and addressed.
It helps asset managers stand out from the crowd
For asset managers that have already invested considerable resources in improving their investment practices and in communicating their RI efforts, obtaining third party assurance against an established standard would be a differentiating factor to increase their visibility, credibility and positioning in the marketplace. According to industry data collected through the UNPRI 2017 Transparency Reports, less than 5% of PRI signatories currently conduct internal or third-party assurance of their RI processes.
Given the UNPRI strategic push for greater accountability, we expect the topic of assurance to continue to gain prominence*. Earlier this week the UNPRI Assurance Working Group published a guide to Introducing Confidence-Building Measures to help signatories navigate the complex landscape of verification and assurance. The guide points to the fact that there are currently very few assurance standards tailored to ESG processes.
“For asset managers looking to showcase their leadership in RI, we believe SIMS offers a new way to embed ESG integration in core investment processes and to drive continuous improvements throughout the organisation.”, says Berenike Schmidt, Manager Financial Services Industry at SQS.
It helps asset owners select the best asset managers
As this topic matures through awareness-raising and new standards development, more asset owners are likely to pay attention to this and to use certification as a criteria in their fund managers research and selection. This will be facilitated by the fact that asset owners will soon be able to access the UNPRI signatories’ assurance data through the UNPRI Data Portal. This will give asset owners an efficient way to quickly identify asset managers who can demonstrate the quality of their responsible investment processes.
It is a worthwhile investment
Assurance is often perceived as overly technical and costly, but the process of obtaining certification is relatively straight-forward and it offers many benefits. An accredited third-party certification body (such as SQS) typically performs an audit to provide independent confirmation that the standard requirements are being met by the asset manager. This independent review of investment processes provides valuable input on the asset manager’s current strengths and weaknesses, which can feed directly into the RI strategy implementation.
Initially, the SIMS certificate will be available only to Swiss and European asset managers, in the form of a Swiss Label / IQNet Label. But as it gains acceptance in the industry and is further adapted based on feedback from asset managers, it will develop into an international ISO standard. If you are interested in learning more about this new standard, feel free to contact us.
*For full disclosure, Cecile Biccari is a member of the UNPRI Reporting and Assessment Advisory Committee where the topic of assurance is frequently discussed.
