Shanny Basar speaks to Elena Philipova, global head of ESG at Refinitiv, about her crusade to bring ESG investing into the mainstream.
Elena Philipova became interested in environmental, social and governance investing 15 years ago when it was a niche topic. She was determined to drive ESG into mainstream investing and has come a long way in this mission by becoming global head of ESG at Refinitiv, responsible for the end-to-end management of the data provider’s ESG business, products and service to more than 40,000 institutions in over 190 countries. She may also be one of the few financial executives who speaks Bulgarian, as well as English, German and Spanish.
In addition, Philipova was Rapporteur for the benchmarks group of the European Union Technical Expert Group on Sustainable Finance which published recommendations on a new taxonomy in March this year. She described her experience on the EU Technical Expert Group as the “most enriching” time of her career due to the collaborative environment of the public and private sectors working closely together.
“The biggest take away was experiencing all the passion and the wealth of knowledge and willingness to meet the concerns of the market,” she said.
Philipova added that Refinitiv could provide perspective to the Technical Expert Group by explaining the needs of global customers and the technical challenges that investors face in implementing structural changes.
The Taxonomy Regulation was adopted by the European Parliament in June. Valdis Dombrovskis, then Executive Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union, said in a statement that the adoption marked a milestone in the EU’s green agenda.
“It creates the world’s first ever classification system of environmentally sustainable economic activities, which will give a real boost to sustainable investments,” said Dombrovskis. “It also formally establishes the Platform on Sustainable Finance. This Platform will play a crucial role in the development of the EU Taxonomy and our sustainable finance strategy over the coming years.”
Philipova said the EU Commission has shown leadership in sustainable finance regulation and the taxonomy is being turned into a fundamental building block for the transition to a green economy.
“Transparency and standardisation will bring clarity and the right tools to make the shift towards a sustainable economy and enable the financial industry to make more informed decisions,” she added.
Transparency and standardisation are also the main prerequisites for the finance to avoid accusations of greenwashing according to Philipova. As sustainable investing has become more popular and attracted more flows, there have been concerns about greenwashing where fund managers, and corporates. falsely advertise sustainable policies and activities.
“Greenwashing was at the heart of our conversations but there is no magic wand to solve the problem,” added Philipova. “The driving force of Refinitiv ESG solutions is objective data and auditable analytics that are fully transparent, rather than black boxes.”
She continued that the market needs to make a shift towards sustainable finance that makes a positive impact while minimising adverse impact. This year she has been encouraged by the acceleration of ESG across public and private sectors and regions despite scepticism that the opposite would happen as companies focussed on surviving the impact of the global pandemic.
“One year ago, I was less optimistic as ESG was a small portion of capital markets and assets under management,” she said. “Since then, there have been some big wins across the public and the private sectors and change is rolling downhill like a snowball. I am hopeful this will be sustained and will soon be the new normal.”
The Covid-19 pandemic and social unrest has led to a growth in focus on the ‘social’ in ESG where data transparency is not as readily available. Philipova explained this is a challenging topic and standardisation is more difficult than for environmental factors. Refinitiv is aiming to bring more clarity to social aspects and working with industry partners to propose the minimum factors that need to be reported.
Philipova said: “The firm has a crucial role to play in enabling sustainable investment to continue and be at the forefront of the transition by providing data to enable better investment decisions. The direction of travel is clear, and companies need to lead the change, rather than being followers. Broadly speaking, ESG and sustainability are yet not embedded in how businesses operate.”
Philipova became a research analyst at Morgan Stanley in 2001 after completing an MBA in Finance and Business Administration at Stetson University in Florida,
“However, I became uncomfortable with how finance operated and how superficially decisions were made,” she said. “There was little understanding of how investment decisions were made and whether the business we invest in would be around in 12 months.”
After three years at the bank, she left to join Asset4, a Swiss-based provider of ESG data which was acquired by Thomson Reuters in 2009.
“At that time, 15 years ago, ESG was a niche market and I came across a start-up operating in that sector,” Philipova said. “It became my mission to drive the message into mainstream investing.”
The availability of ESG data has grown hugely since that time but Philipova admitted there are still huge gaps as the financial industry struggles to measure and track the impact of ESG investments.
“We are having lots of conversations on improving data and transparency, such as on racial diversity, and there is a lot more work to do,” she added.
Refinitiv produces a Diversity & Inclusion index using its own ESG data in order to objectively measure the relative performance of nearly 10,000 companies representing more than 80% of global market capitalisation. Proprietary analytics are used to rate and score companies across four main pillars: diversity; inclusion, people development and controversies and the top 100 are selected for the index.
Debra Walton, chief revenue officer at Refinitiv, said in a statement: “The global pandemic has certainly brought to light a renewed focus on diversity and inclusion, reinforcing the reality that we are all in this together. Data-based insights and transparency are a fundamental element of a successful movement to achieve more diverse and inclusive workplaces.”
The index is in its fifth year and the latest version, published last month, showed that the top industries were banking, investment services & insurance firms. By country the United States led the list with 20 firms followed by the United Kingdom with 13. Asset manager BlackRock was at the top of the list. Africa led the way for female managers with an average of 34%.
Philipova’s advice to other women is to pursue their passion and do what makes them happy.
“You should not compromise your beliefs and should not be afraid of causing disruption,” she said. “It is better to take the opportunity to drive change rather than being passive and scared.”
She continued that Refinitiv encourages and empowers her to use her great passion for ESG and have a significant impact by creating a positive change in the market. Philipova concluded: “I am energised and ready to conquer.”