Laura Jesson has more than 25 years of experience in the financial services industry as a project manager, business analyst, and consultant. She joined Cutter Associates in 2013. Prior to Cutter, Laura spent eight years at Wells Capital Management and Evergreen Investments, where she managed investment operations projects, including those focused on outsourcing, client reporting, and trade management. She previously worked at Omgeo as a member of the Central Trade Manager (CTM) product design team. Laura started her career at Andersen Consulting (now Accenture) as a process consultant supporting a variety of projects for clients in the financial services industry. Laura earned her bachelor of arts in economics and psychology from Amherst College. She holds the Project Manager Professional (PMP) certification.
Recent research assignments and publications include the following:
AI Use Cases in Investment Management: Infinite Possibilities
Business Intelligence Tools
Cutter Benchmarking: Client Reporting
Cutter Benchmarking: Firmwide ESG Capabilities
Cutter Benchmarking: Managing Vendors and Service Providers
DataOps: In Theory and Practice
Enabling Data Analytics
ESG Data Management
ESG: It’s a Jungle Out There ─ A Look at the Data Provider Landscape
ESG Investing: One Vision, Many Lenses
Execution Management Systems
Hybrid Work Arrangements and Their Impact on Firm Culture
Philip (Phil) Orlando is a Consultant at Cutter Associates and brings over eleven years of consulting, organizational strategy, client service, operations, accounting, and IT experience to Cutter clients. Phil has been involved with multiple Front, Middle, and Back Office strategy engagements covering accounting systems, portfolio management and trading, pre and post-trade compliance, risk management, and data management and governance. Phil also has extensive experience with client and sales management (e.g. client reporting, CRM).
Prior to joining Cutter Associates, Phil was an Organizational Strategy Business Analyst at State Street Bank where he worked on several large-scale projects including the implementation of an enterprise workflow tool and a new inquiry management system. He also guided a program purposed to transition complex cash, reconciliation, and trade tasks from the business units to centers of excellence (COEs).
Previously, Phil was an ETF Client Operations Account Manager at State Street Bank. He launched new ETFs & on-boarded new clients, managed relationships with several ETF sponsors, and crafted specifications for IT resources to continuously improve the accuracy, reliability, and efficiency of ETF processes.
Phil holds a B.S. in Finance from Stonehill College and is also a CFA charterholder.
Dec 12, 2023
Today’s clients expect relevant, timely, informative, and comparable data points on their client reports. But unfortunately, firms are struggling with many questions about how to best support ESG data and client reporting ─ and have little automation and maturity in this area. The results of Cutter Associates’ Q2 2023 Firmwide ESG Capabilities Benchmarking survey found that supporting ESG operational practices within client reporting is the area where firms report their lowest capability levels. Below, you can see the average score of 1.8 in the summary of scores by category and metric.
Summary of Firmwide ESG Capabilities by Category and Metric
Source: Cutter Benchmarking survey, Q2 2023
How do we explain this? Well … it’s pretty simple. Clients don’t know exactly what they want and need for ESG on client reports, and managers are still learning too. Managers are reluctant to overreact to current client requests because doing so may introduce more confusion or rework in the future ─ and that doesn’t help the client or the manager.
In reports, clients would ideally like to see the inclusion of key ESG factors that managers use for decision-making and the impact on a portfolio’s risk and performance. While plenty of ESG data exists, there’s no standardized set for use in client reporting. Asset managers must consider which reports should include ESG data, what type of new ESG-specific reports should be created, and which accounts should get ESG data and at what frequency. While the path forward for ESG client reporting is unclear, asset managers are responding to custom and ad hoc client inquiries, although it’s mostly done manually at this point.
Layers of Questions for Consideration
Source: Rate the Raters 2023: ESG Ratings at a Crossroads
Client-facing teams haven’t agreed on the best summary level ESG data for reports. A manager-derived ESG rating (or something akin to that) sounds like good summary level-data that asset managers might include in their client report templates. Managers express a high degree of satisfaction with internally derived ratings and rely on that data for internal purposes, but there is a catch when it comes to extending the use to clients. The algorithms and underlying data behind managers’ internally derived ratings are highly sophisticated, often hard to explain, and not comparable to other managers’ internally derived ESG ratings. So, what about using vendor-sourced ESG ratings that are better explained and comparable? These ratings are generic and disputed. The future of this data is also in question after S&P announced earlier this year that it would no longer provide this data.
Assuming that client-facing teams and clients could reach agreement on which summary-level ESG data would help the most, the question also arises: Which accompanying detail-level ESG data is needed? Overall, teams are still maturing their ESG data acquisition, management, and integration throughout the organization so that they can more confidently use the right data in downstream processes like ESG client reporting. Firms may consider many distinct aspects of ESG in their investment processes ─ including carbon output, deforestation, modern slavery, and bribery and corruption. Each of these aspects carries its own detailed data that is meaningful.
Which reports need to be adjusted to include ESG data? Good question! All risk reports? All performance reports? Summary-level holdings reports? Detail-level reports? Should there be ESG versions of reports? Should ESG reports be generated and delivered only for certain accounts? The current state per our survey respondents is that almost half of firms (46%) create separate ESG-specific client reports. Only 8% said they include ESG data within existing client reports.
What about the frequency of ESG reporting? Asset owners and asset managers often wrestle with vended ESG data and its cost, coverage, and quality. One of the biggest issues with quality is that the data isn’t timely enough ─ culled from corporate filings and other sources refreshed annually or relatively infrequently and out of sync with our real-time data mindsets. So, the frequency of reporting ESG data and subsequent changes has become a particularly important consideration for client reporting.
Is ESG client reporting only for accounts with a stated ESG mandate? Or do all account holders, regardless of the ESG commitments in the investment management agreement (IMA), expect some level of ESG data to accompany their reports? The current answer is that firms provide ESG client reporting for a limited account set. Only 4% of respondents said that they include ESG metrics for all accounts, regardless of their ESG mandate. This low percentage may reflect a lack of organizational readiness or a preference. Over time, market conditions, client pressures, and the evolution of a firm’s values and principles may increase this percentage.
How much will commentary, reaction to news, and recaps of engagement activities support client reports? How much training will accompany the ESG client reports?
Tempered Expectations: More Time and Education Are Needed
With so many outstanding questions and the complexity of yet-to-be-defined ESG client reporting requirements, asset managers report that much of the work performed to support ESG for client reporting is manual and custom. In fact, 47% of survey respondents reported that they have limited automation or support for only some ESG data within client reports.
We do not expect this to change overnight. We expect that clients will continue to ask for ad hoc ESG requests. Meanwhile client service teams and relationships managers will keep working hard with their Centers of Excellence (CoE) and data experts to understand the ESG data more deeply and help communicate clearly to clients. We also expect that clients will learn more and refine their processes for analyzing ESG data. They’ll keep fielding questions from their executives and boards and will learn from other managers. Then they’ll ask better questions. These organic back-and-forth processes have begun, and they are mutually beneficial.
Additionally, industry groups, ESG data providers (some of which are ESG advocates), client reporting vendors, and research/consulting partners like Cutter, will continue to educate the industry about this topic and support improvement efforts.
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