The drafters of a new standard to help financial companies manage their sustainability obligations and targets is also working with academics to identify how data can be better used to improve ESG performances.
The British Standards Institution (BSI) has enlisted the help of universities, including Oxford, in its IMPACT programme to work out ways that data can be better used to establish companies’ sustainability performances.
“As we start to think about purpose-led organisations, organisations that are driving change with a particular ESG purpose in mind, how do you know you’re purpose led if you don’t use data, and you don’t measure the impact of change?” Martin Townsend, Director for BSI Centre of Excellence for Sustainability told ESG Insight. “We are doing this work to answer that fundamental question – how do we make sure that organisations that want to drive change put data at the heart of it?”
Clarifying ESG
The study has been run in parallel with the creation of the BSI’s latest standard for financial services companies, BS ISO 32210, which was unveiled this month. The standard, which applies globally, seeks to provide guidance on how companies can refine their operations to improve their own ESG metrics and outcomes. Its guidance covers all ESG issues and not just climate and climate-risk.
One of its key aims is to help provide clarity around the bewildering range of ESG data and metrics, most of which lack any common means of calculation and assessment. That makes comparisons difficult when institutions are trying to fathom which assets to buy and which to screen out of their portfolio construction and risk-management models.
“There is so much going on in the financial sector, that effectively it’s very easy to get paralysed by confusion,” said Townsend, as career sustainability executive who has also worked at the UK government’s Department of Environment, Food and Rural Affairs. “What BSI does incredibly well is it simplifies complex landscapes – it’s about providing practical advice.
Tying Threads
While the standard has been written for asset owners, asset managers, banks, insurers and service providers, including data vendors, Townsend anticipates BS ISO 32210 will be of most use to smaller companies.
“The larger organisations that are already doing lots of this work might just dip into the standard, they might just read it, they might just take a small element away from it,” he said. “We’re trying to help everybody improve on their journey around ESG and sustainable finance.”
BS ISO 32210 is not a regulation but was created to help companies pull together the threads of the growing slate of regulations with which they must comply. Townsend said the standard also helps institutions identify how to align their disclosures and other reporting expectations under the many ESG reporting frameworks, such as the Taskforce for Climate-related Financial Disclosures (TCFD).
“Sometimes companies are confused,” he said. “There’s a lot of guidance, there’s a lot of regulation. We need to help companies to simplify that, but we actually do need to make sure that data becomes part of that ecosystem change.”
The standard has had a long gestation period. An initial set of guidelines were established in 2018 as the BSI Sustainable Finance Programme, backed by the City of London’s Green Finance Institute. Some initial principles of sustainable finance were published in 2020. That was later followed by an ISO technical report the following year, which offered guidance on applying sustainability principles within the finance sector.
Standard Demonstration
Companies can demonstrate their alignment with the standards in a number of ways, including:
- Publishing a sustainability statement or policy;
- Developing strategic goals on material sustainability issues;
- Establishing the best metrics and key performance indicators;
- Identifying the executives and governing body members accountable for sustainability matters;
- Aligning executive pay with sustainability performance;
- Drafting a stakeholder engagement plan.
It also recommends that external verification and assurance of disclosures and data is conducted.Townsend said the BSI’s own auditing expertise would play a role in monitoring alignment and development of the standard to ensure it meets the demands of the rapidly changing sustainable markets.
“They are there purely just to lift up the whole sector, to make sure that the companies are driving change, and that they are aspiring to make sustainable finance the best it can be,” he said.
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