A family office guide to sustainable investment reporting

As the world continues to face pressing environmental, social, and governance (ESG) challenges, sustainable investing has gained significant traction among investors, including family offices. Family offices are increasingly recognizing the importance of incorporating sustainable investment strategies into their portfolios. In addition to aligning with their values and addressing global challenges, family offices are also realizing that sustainable investments can generate competitive financial returns.

One critical aspect of sustainable investing for family offices is reporting. Accurate and transparent reporting of sustainable investment performance is essential for evaluating the impact of investments and demonstrating accountability to stakeholders.

1. Transparency: Family offices should strive for transparency in their reporting by providing clear, accurate, and reliable information about their sustainable investments. This includes disclosing the environmental, social, and governance factors considered in investment decisions, as well as the impact and outcomes of these investments. Transparent reporting helps build trust with stakeholders and allows for informed decision-making.

2. Materiality: Family offices should focus on materiality when reporting on sustainable investments. Materiality refers to the significance of ESG factors in relation to a company's financial performance and long-term sustainability. Family offices should identify and report on the ESG factors that are most relevant to their investment strategy and disclose how these factors are considered in the investment decision-making process.

3. Standardization: Family offices should consider using standardized reporting frameworks and guidelines to ensure consistency and comparability in their reporting. Examples of widely recognized frameworks include the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). Standardized reporting allows for better benchmarking, enables investors to compare performance across different investments, and enhances credibility.

   
   
   

1. Define and Communicate Reporting Objectives: Family offices should clearly define their reporting objectives, including the purpose, scope, and frequency of their reports. This helps set expectations, ensures consistency, and guides the selection of appropriate reporting metrics and frameworks.

2. Select Relevant Metrics: Family offices should identify and report on the key ESG metrics that are most relevant to their investment strategy and stakeholders. These may include carbon emissions, energy consumption, water usage, employee diversity, community engagement, and corporate governance practices, among others. It's important to select metrics that are meaningful and aligned with the family office's sustainability goals.

3. Provide Contextual Information: Family offices should provide contextual information to help stakeholders understand the significance and impact of reported metrics. This may include explanations of the methodology used, benchmarking against industry or regional peers, and insights into the progress made towards sustainability targets. Contextual information provides a holistic view of the family office's sustainable investment performance and enhances the credibility of the reports.

4. Engage Stakeholders: Family offices should actively engage with stakeholders, including investors, clients, and beneficiaries, to understand their information needs and preferences. A powerful reporting software can support here as it can offer indtnad and personalised reporting dashboards tailored to each individual stakeholders requirements. Engaging stakeholders and presenting back personalised data demonstrates the family office's commitment to transparency and accountability and helps build trust and long-term relationships.

Sustainable investment reporting is essential for family offices as they often have a long-term investment horizon, and sustainable investment reporting helps them assess the impact of their investments on long-term sustainability and social responsibility.

Family offices are also increasingly focused on aligning their investments with their values and the values of the families they serve. Sustainable investment reporting allows them to monitor and report on how their investments are performing from an ESG perspective, helping them ensure alignment with these values. They also find that sustainable investment reporting is increasingly demanded by investors, regulators, and other stakeholders. Family offices must meet these reporting requirements to enhance transparency, build trust, and attract capital. Importantly though, sustainable investment reporting can also help family offices manage risks associated with ESG factors, such as reputational risks, legal risks, and financial risks, by identifying and addressing ESG-related issues in their investments.

If you would like a no commitment demonstration of Elysys Analytics, our family office reporting software, please contact us to arrange a meeting.