Envestnet ESG is Nothing More Than Additional Information

Matthew Carroll St. Louis Cardinals

February 13, 2023


Envestnet (ENV) is an American financial technology corporation that develops and distributes wealth management technology and products to financial advisors and institutions. Their flagship product is an advisory platform that integrates the services and software used by financial advisors in wealth management.

As global challenges such as climate risk, increased regulatory pressures, social and demographic shifts and privacy and data security issues increase, investors may reevaluate traditional investment approaches.

Sustainability Reporting

As governments continue to pass new regulations, sustainability reporting is essential for staying compliant. It also provides a framework to set goals and monitor progress.

Sustainable reporting enables companies to identify and uncover non-financial risks and opportunities while increasing transparency about their operations. It can also help companies build trust among stakeholders.

For sustainability reporting to be meaningful, it must be credible, reliable, verifiable, and comparable. This means that companies must have robust processes and controls to ensure that their sustainability information is accurate and consistent while also generating trust among investors.

Many different standards can be used to evaluate sustainability reports, including the Global Reporting Initiative (GRI) and AA1000. These frameworks are designed to make it easier for businesses of all sizes to prepare their reports.

ESG Screening

ESG screening involves looking at a company’s sustainability practices and evaluating its performance against your chosen criteria. This can help you make more informed decisions about your portfolio and ensure that you’re aligned with your values as an investor.

There are two main types of ESG screening: positive and negative. In positive screening, investors focus on companies that score highly on environmental, social and governance factors relative to their peers.

Similarly, negative screening seeks to exclude stocks seen as unsustainable from an ESG perspective. These can include companies involved in industries with controversial product involvement, such as tobacco, animal testing or pesticides.

Envestnet’s screener uses Morningstar-owned Sustainalytics, a company-level rating system that assesses a company’s exposure to ESG risk and its actions to address those risks. It also provides a numerical ESG risk rating that indicates the company’s overall likelihood of experiencing a negative financial impact from an ESG issue.

ESG Reporting Templates

ESG (Environmental, Social, and Governance) reporting communicates a company’s sustainability initiatives. It’s an essential element of an investment strategy and can help you screen investments for environmental and social risk.

Several ESG frameworks and standards are available for companies to use when creating their reports. Some of the most prominent frameworks include the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB).

Using these frameworks is a great way to ensure that you’re reporting accurately while keeping your goals aligned with your company’s purpose. GRI gives you a high-level scope to follow, while SASB provides industry-specific guidelines that can be tailored to specific sectors.

ESG Integration

There are several ways investors can systematically integrate environmental, social and governance (ESG) factors into their investment processes. These include adjusting forecasted company financials and models for the expected impact of ESG factors or integrating these into fair values and investment recommendations directly.

Envestnet is now adding an enhanced ESG due diligence framework to evaluate third-party portfolio managers on its platform. This framework uses meetings and a questionnaire to vet managers based on their firm-level ESG policies, integration in the investment process, and reporting on impact and engagement on ESG issues.