OpenInvest launches ESG reporting software

Advisers will have an easier time exposing clients to companies that meet customizable environmental, social and governance guidelines

OpenInvest, a digital advice fintech focused on impact investing, announced Wednesday the roll out of a new subscription-based service designed for independent advisers to deliver reports that visualize the ESG impact on an investor’s holdings.

Portfolio Diagnosis, which has been in development during the last three years, is a system that analyzes billions of data points from in-house research to sustainability experts, like the Carbon Disclosure Project, to illustrate to investors the impact of their environmental, social and governance investments.

Advisers can even show investors that their investments translate into a number of trees planted or an amount of carbon not emitted into the atmosphere, according Josh Levin, co-founder of OpenInvest.

“A lot of companies will collect data from one-stop shops like Sustainalytics, but we do not take that approach,” he said. “We go a level down and look for the best data sources at each sub-indicator level.”

For example, the tool pulls metrics from firms that focus solely on providing data on gender pay gaps or companies lobbying for more prison construction, Levin said.

OpenInvest would not disclose the fee, but Levin added advisers would be charged according to the amount of reports generated. The firm also would not divulge how many RIAs are on the platform, however, it manages approximately $55.4 million in assets and works with more than 520 retail clients, according to the firm’s most recent Form ADV.

The tool is only available to independent advisers.

Advisers are increasingly leveraging ESG tools as investor demand for impact investing has grown. In fact, the COVID-19 pandemic has spurred additional interest in ESG investing; global assets are expected to surge to $53 trillion by 2022, according to a Celent analysis published last Thursday.

“There is a transformation going on in the asset management industry from a product business to a service business,” Levin said. “ESG investing is really just the catalyst to push the industry further in this direction.”

Fellow tech providers have already deployed reporting software as a way to allow advisers to paint a picture of a client’s financial standing including Addepar, Envestnet Tamarac and Orion Advisor Solutions.

Investors will have an easier time investing in companies that meet expectations in areas including gender equality, LGBTQ rights, and ethical supply chains, as well as divest from those that don’t, in areas like fossil fuels, deforestation, and greenhouse gas emissions, according to the values of the individual investor.

“Currently, we’re using over 15 data sources with about 200 indicators flowing through — and we have our own proprietary system for aggregating and normalizing that data,” Levin said. OpenInvest then adds another layer of algorithms that crosses that data with an investor’s unique portfolio and then generates everything into a tangible report.

The reporting software is designed for investors who want a financial adviser’s guidance throughout the entire process as opposed to robo-only investing, Levin said. “People used to think robos would take over advisers jobs,” he said. “I think it’s the opposite — this technology is going to make advisers the star of the show.”