RepRisk CEO SPEAKS OUT ON ESG & INVESTMENT MANAGEMENT

Skytop Founder & CEO Christopher P. Skroupa interviews Dr. Philipp Aeby,
RepRisk, on ESG & Asset Management
April 13, 2021
Click here for more information about RepRisk 

Dr. Philipp Aeby is the CEO and co-founder of RepRisk. He is an expert in business conduct risk management, with a special interest in machine learning. 

Before joining RepRisk in 2006, Philipp served in various managerial positions across Europe at Amgen, a global biopharmaceutical firm, and worked on a broad range of international assignments with the Boston Consulting Group. He started his career as a visiting scientist at the International Center for Tropical Agriculture in Colombia.

Philipp holds a PhD in Environmental Physics and a Master’s degree in Climatology and Hydrology from the Swiss Federal Institute of Technology (ETH) in Zurich, Switzerland, where he earned the ETH Medal for outstanding research that involved applying neural networks to pattern recognition.

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Christopher P. Skroupa: As ESG has taken hold with institutional investors and public companies, how has data evolved–has ESG data been able to support big capital investments in ESG, and if so– why?

Dr. Philipp Aeby: The growth in the industry has been astronomical – sustainable investments have almost doubled over four years, and more than tripled over eight years, from $13.3 trillion in 2012 to $40 trillion in 2020.

ESG assets under management are predicted to top USD 53 trillion by 2025. Meaning the data industry has a responsibility to drive better decision-making for those allocating capital by providing timely and relevant data. As a data science company, we systematically identify and assess ESG risks related to companies worldwide – currently more than 165,000, public and private. Recently, there’s been a shift – meaning it is now accepted and understood that having a risk-focused approach is a key part of ESG, and that looking beyond company disclosures is key. This has been RepRisk’s approach since the beginning and we believe it’s the best way to generate meaningful, actionable ESG data.

Christopher P. Skroupa: What are the core areas of ESG integration for institutional investors? We have seen interest in peer benchmarking among companies. How do you feel that might help the asset management portfolio manager or a pension fund investor?

Dr. Philipp Aeby: Investors use ESG signals throughout their investment processes, from pre-investment due diligence to portfolio construction and monitoring to company engagement. ESG data informs decisions across all asset classes and is used to build portfolios that are aligned with international standards such as the UN PRI, SASB, and the SDGs. Most importantly, ESG risks must be treated as a primary consideration in risk management. Benchmarking can be useful and provide insights into how a company performs compared to its peers – but best-in-class analysis cannot substitute a comprehensive ESG risk assessment. This is where RepRisk data can serve as a reality check for how companies conduct their business around the world – by intentionally excluding company-disclosures in our research approach. It is generated using a rules-based and consistent methodology that leverages the combination of artificial intelligence and machine learning with human intelligence. We believe that multi-dimensional analysis, as opposed to a single rating, and looking beyond self-reported company disclosures leads to a better, comprehensive assessment of material ESG risks. 

Christopher P. Skroupa: Will ESG integrate into due diligence for all investing, or will it become a deeper, more textured investment strategy?

Dr. Philipp Aeby: A particularly telling sign has been in our conversations with our clients – we are now speaking with those who manage assets directly and not those who just operate in a siloed sustainability function. That role is no longer siloed just as ESG is no longer siloed. We anticipate that ESG will be an integral part of strategy, and that investors will have to adapt their strategies to ESG – not the other way around.