Fund administrators are revamping their environmental, social, and governance offerings to asset managers following the rollout of the EU Sustainable Finance Disclosure Regulation (SFDR) and as demand for more transparency from regulators, corporates, and investors increases.

Fund administrators SEI, SS&C GlobeOp, and IQ-EQ, for instance, are using in-house technology to keep up with new EU regulations and increased disclosure requirements around ESG investing. All three administrators run platforms that incorporate datasets across different asset classes, sectors, and jurisdictions. Northern Trust, though, is instead leaning on its fintech partnerships, and recently took an equity stake in cloud-based analytics platform Equity Data Science to support its Northern Trust Whole Office interoperability strategy, which aims to combine the bank’s architecture with partnerships to create access across trading, operational, data, digital, and analytics solutions.

SFDR took effect in March and sets sustainability disclosure obligations for financial market participants and financial advisers in the EU, including information on how sustainability risks are integrated into the investment decision‐making process, and how remuneration policies align with the integration of sustainability risks. It’s also important to note, though, that fund admins are having to address more than just SFDR—it’s just the latest in what will likely be more regulations coming down the pike not just in Europe, but in the Americas and Asia, as well.

SS&C GlobeOp launched an ESG reporting functionality for asset managers in early September as an extension of SightLine, its web-based data management platform that allows users to aggregate data—such as SS&C’s security master data and users’ chosen third-party data—and perform analytics and visualization schemes. The new addition, which was built with Sustainalytics, includes carbon risk and sensitive sector exposure disclosure reports.

GlobeOp managing director Michael Megaw sees ESG reporting solutions as natural extensions for fellow fund administrators’ offerings. Through GlobeOp, asset managers are given an ESG reporting capability that allows for disclosures on the makeup of their portfolios and metrics for scoring those portfolios against Sustainalytics’ ESG dataset.

“The platform itself is a tool that allows us to take data from any source, bring it together and create customized reporting for our clients,” Megaw says. “It’s a trend to make sure you are not just thinking about returns—you’re also thinking about the sustainability and governance of the things you invest in.”

Like SS&C, SEI provides a tool, the SEI Manager Platform, in which asset managers can view their holdings against other ESG data vendor baselines. SEI’s strategy has centered around preparedness, building enough capabilities in-house so that when regulatory winds or investor demands shift—as they often seem to in the world of ESG—the company doesn’t find itself having to overhaul tools that clients rely on, or at the mercy of third-party vendors and their thinking.

“We don’t try to reinvent the wheel,” says Jean White, SEI global sales director. “Anytime there’s a regulatory change, we understand what it means, and our technology is very well placed to allow us to take in additional items.”

IQ-EQ Compass follows the same vein as SEI and SS&C by doing the heavy lifting itself. Compass provides asset managers with a solution to institute and maintain an ESG strategy by helping to build individualized ESG frameworks.

“There is no one-size-fits-all approach to ESG, and each firm’s strategy will be driven by their specific mandate and obligations to stakeholders,” says IQ-EQ director Libby Toudouze.

The data is sourced from key performance indicators, and the technology platform is designed to monitor, analyze, and report on ESG metrics at the firm, portfolio, and individual asset level. Toudouze says multiple types of data source have been incorporated to allow for flexibility with technology offerings. “We have a large in-house software team which allows us to offer not only a standardized dashboard but also a completely customized dashboard to clients and incorporate data sources, accounting software, [and so on] that they are already using.”

Northern Trust, however, has taken a different approach. Its Whole Office interoperability strategy has the institution thus far relying on outside technology providers for expertise. Northern Trust Whole Office, which the administrator rolled out last year, is an open architecture, multi-asset-class solution that gives clients access to various technologies and capabilities. Other recently announced partnerships include behavioral analytics and consulting services platform Essentia Analytics, BlackRock’s Aladdin system, and Venn, a cloud-based investment analytics platform.

“When we think about Whole Office, then we think about this idea of partnering with fintechs that can deliver capabilities that it may take us longer to develop or be more costly to develop,” says Paul Fahey, Northern Trust’s head of investment data science. “There’s so much change that if we were to try to and build everything ourselves, I think it would be inefficient from a cost perspective and inefficient from a time perspective.”

Fahey sees ESG as core to the investment process and believes that investment in relevant partnerships is the right path for Northern Trust. As part of that strategy, Northern Trust took an equity stake in cloud-based analytics platform Equity Data Science in February. Through this partnership, managers have access to a technology platform that aids in idea generation, research management, portfolio construction, and risk management, Fahey says.

“When we think of Whole Office, we extend that into the front office and the investment process itself so it’s really impacting the output side of the equation, not just the cost side,” he says.

As noted previously, SFDR may prompt similar rules in other jurisdictions. ESG disclosure regulation in the US could possibly come from the Securities and Exchange Commission through the ESG Disclosure Simplification Act of 2021, which was introduced in the House of Representatives in February. It would allow the SEC to require corporations to disclose ESG metrics. Fund administrators may be steeling themselves against the unknown differently, but they share a common refrain: change is constant.