In recent years, sustainable investments have grown significantly, especially in Europe, fueled by regulatory frameworks such as Articles 8 and 9, thematic funds, and other ESG-labelled investment vehicles. Globally, this sector is managed by investors handling over $100 trillion in assets. Risk control metrics, initially considered supplementary, have become essential due to the growing focus on market, regulatory, and reputational risks. Key challenges for integrating these metrics include evolving methodologies, such as those related to climate change and biodiversity, and the limited availability or quality of ESG data, particularly in emerging markets and certain asset classes. Despite these obstacles, advancements in big data and artificial intelligence offer promising tools for enhancing ESG risk management. To navigate these complexities, investment teams require robust, integrated dashboards that combine both financial and ESG data, ensuring real-time portfolio monitoring and risk control. These systems are critical for ESG compliance, mitigating greenwashing risks, and meeting client demands for tailored solutions.

Author

• Jean-Philippe Desmartin, Edmond de Rothschild AM, Head of Responsible Investment, co-chair of CESG EFFAS.