LemonEdge solves for the E

LemonEdge solves for the E (in ESG)

The S as well as the G of ESG have been part of the administration challenge across the asset management industry for some time. However, it is currently the E that is demanding most attention as the explosion of data associated with managing climate change metrics has risen to dominate the latest wave of fund administration information to be managed.

Jamie Nascimento
September 8, 2022
min read

The root cause of the current upswing is, arguably, driven by the asset owners who, due to wider governmental or societal pressures, are setting climate change policy typically along the lines of achieving firm-wide ‘net zero carbon emissions’ or a certain level of ‘water usage efficiency’, policies which hence apply across their all investments, with each to be phased in over time culminating in a certain final date target.

It is those simple objectives which have triggered a downstream impact on asset managers then on asset servicers who consequentially need to gather then manage the associated data.

Which is where the crux of challenge arises, as the data required is for every end investment, with multiple data points associated with every metric of every investment. For example the climate change policies will typically trigger the need to gather then manage datapoints such as: absolute carbon emissions, intensity of carbon emissions, power generation measurements, water usage measurements, water recycling measurements, etc as well as whether each investment entity is actually signed up to meet such environmental commitments including what the profile of the targets for each item looks like (all of which is in addition to the pre-existing metrics around eg gender pay gap, employment diversity, health, safety, etc).

Thereafter all that data needs to be gathered then stored ready for climate change calculations to be undertaken, which themselves are at every level of every fund structure, hence across the entire asset servicer, asset manager, asset owner value chain.

Compounding all of that is the additional requirement for all the information to also be across all relevant time periods, with the cherry on top being that the entire universe of such data needs to be accessible for analysis then reporting.

Which is why the legacy fund administration systems cannot cope with the challenge, because not only did ESG not exist when they were designed, but neither did the general concept of true database extend-ability, as back in the day the assumption was that the demands of a fund administration system were simply limited to the core processes.

As a consequence of those design limitations though the legacy systems do allow for user defined fields, (UDFs), they are typically limited by the number of fields available or by the type of field, or both. The legacy systems typically also cannot integrate the UDFs into their reporting solutions or their audit, access control or management systems, as a consequence of which for the legacy systems managing the E in ESG results in a plethora of workarounds in trying to make the best of their limited capabilities to meet the ESG business needs.

LemonEdge solves for all of these challenges from the outset, by design. Hence for the LemonEdge system there is no limit to the number or type of fields that can be added at any level of any entity of any structure of any complexity. With all of that data fully available alongside all core data for the purposes of analysis, reporting, audit or access control.

Thus LemonEdge solves for the E (in ESG)

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