I am frequently asked how do you determine if a specific investment discloses the information an investor needs in order to know what they own.

The short answer is by asking investors and then comparing this to what is actually disclosed.

Let me give you an illustration.  As the FT’s Gillian Tett observed about green bonds (one category of ESG investments):

Take note, for example, of a startling detail revealed by Dan Shurey, a senior official at Bloomberg, last week in Washington: Bloomberg terminals currently display an eye-popping 959 fields for ESG data, of which 443 are linked to environment and 373 to governance. However, only 22 per cent of bond issuers report on any of those fields. “There is too much and not enough data,” he observed.

There is a reason investors in any specific bond might have an interest in the 443 environment related data fields.  However, not all of these data fields might be relevant for the specific bond issuance.  Determining which data fields are relevant is where asking investors comes in.

At this point, a comparison can then be made to what the bond issuer reports.

If the bond issuer reports all the data fields the investors consider relevant, it qualifies for a label indicating investors can know what they own.  If it doesn’t report all the relevant data fields, it doesn’t qualify for a label.