Trade finance data specialist Coriolis Technologies is to provide sustainability content to RegTech vendor TradeSun, a move that comes as regulators tighten controls around reporting supply-chain ESG performance.
The UK-based company will feed TradeSun’s financial institution clients with ratings and scores generated by its ESG Tracker service, which covers companies linked to import and export deals. The service will give trade lenders deeper real-time visibility into the ESG performance of the investments they back, said Coriolis Chief Data Officer Kris Makuch.
“Investment is starting to swing towards companies that are more sustainable and so by pulling that metric in, we’re giving them more information to make a more informed decision,” Makuch told ESG Insight.
Coriolis gathers and manages ESG data obtained from publicly available sources and maps it to a proprietary methodology that’s based on the United Nations’ 17 sustainable development goals (SDGs). That makes it one of only a few trade finance data offerings that look beyond environmental factors to take in social and governance performance.
Coriolis’ ESG Tracker was developed with more than 50 financial institutions to analyse sustainability information about trade-linked companies. Its scores are also purpose-built to enable compliance with the EU’s Taxonomy and Sustainable Finance Disclosures Regulation (SFDR) as well as the US Sustainability Accounting Standards Board Regulations. Companies are rated on all 17 SDGs as well as other criteria and given scores out of 1,000.
The scores, which are combined with regular import and export data fed into Coriolis’ Multilateral product, also reflect geopolitical risks and those associated with individuals. This is an issue that has attained greater importance since a raft of sanctions targeting people close to China and Russia emerged in the past few years.
ESG, Finally
ESG has come late to export financing, the part of the global commerce system that funds the movement of goods around the world.
It’s now become a focus of efforts to green global supply chains as European regulators have begun demanding financial institutions report their so-called Scope 3 greenhouse gas emissions – the global warming pollutants produced by firms’ up- and down-stream activities. That includes the transit companies that ship raw materials and final products as well as the providers of services and supplies.
The International Chamber of Commerce (ICC) accelerated the change of focus last year when it published a white paper stressing the importance of applying ESG criteria to export finance assessments.
About 80-90 per cent of international trade is financed by investors, most of which is carried out by small and medium-sized enterprises (SMEs), according to the World Trade Organisation. Until recently, however, a tiny proportion of the trillions of dollars of green funding issued in the past few years has gone into trade financing, according to the ICC.
Export finance, “receives only cursory mention in the broader sustainable finance conversation”, it wrote late last year.
Because SMEs aren’t required to directly disclose their ESG performance to regulators, few have put in place the controls and processes to gather and manage their sustainability data. That’s considered the biggest obstacle to financial institutions’ ability to fully comply with Scope 3 reporting regulations.
However, by including ESG in the trade finance space, data can be gathered to fill some of those gaps.
Coriolis sifts for data from such open sources as bills of lading, which are mandatory declarations on goods in transit, the Organisation for Economic Cooperation and Development and even the European Space Agency. That data is then fed into Multilateral, Coriolis’ key trade finance data portal, and used to complement the data that TradeSun and its other partners already possess.
Growing Partnerships
The TradeSun deal follows similar arrangements with Surecom and Minehub. Makuch said such partnerships help it fill critical gaps in the ESG data record.
Although Coriolis is unable to use its partners’ data in services it sells to other clients, the company manages to harvest huge amounts of information through its own initiatives, including techniques that Makuch calls “methodological tricks and indicators”.
Among them is data mirroring, in which information not forthcoming from one entity can be deduced by studying its transactions with a company that does report. For instance, when one country fails to report import data, that information may be available from the exporting counterparties. The result is the compilation of granular data on some of the smallest companies.
“We can come up with scores for firms like, say, Deutsche Bank all the way through to SMEs, like a coffee shop, because of the data points we bring,” said Makuch.
“We try to build it in a way that makes it scalable. It’s almost like the job of gathering the data is never finished, and we must keep building it in a way that is always evolving. It has to be like that to make sure that it’s future proof.”
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