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A Powerful Voice for the ESG Data and Ratings Industry

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The rapid maturity of the ESG data space had threatened to create a void in the policy and regulatory response that should be filled by industry participants.

Three years ago, the Future of Sustainable Data Alliance (FoSDA) was founded to fill that very hole. Created at Davos by Sherry Madera, then an executive at Refinitiv, and the World Economic Forum it has quickly grown to become a powerful advocate for the ESG data, analytics and technology sector.

With a board that now includes representatives from infrastructure services, data and solutions providers and a number of non-government organisations, FoSDA nowadays boasts a membership of data companies large and small and a full-time secretariat.

This year, the organisation finds itself at an important juncture. It is seeking to appoint its first chief executive after becoming recognised as a full-fledged industry membership group. It has also undergone an organisational restructuring to establish key working groups that will carry the brunt of an ambitious programme that aims to have data, ratings and analytics providers in the room as decisions are made on the industry’s future.

“FoSDA is undergoing a transformation from a coalition of certain participants in the wider data and rating space, to a standalone membership organisation for the global ESG data, ratings and products industry,” FoSDA board member and head of ESG product strategy and management at SIX, Martina Macpherson, told ESG Insight.

“Collectively, we want to make sure that whatever is been discussed and negotiated is relevant, and it’s also giving opportunity and not limiting the current markets for the ESG data ratings and products field.”

Mature Sector

Until now, the need for a formal advocacy group within the ESG data and ratings sector may not have been apparent as the market grew at break-neck speed and participants were focused on developing tools and solutions to meet the fast-evolving needs of investors. But the creation of far-reaching regulations and the recent emergence of an anti-ESG lobby have argued for the involvement of a professional body that will take up the industry’s causes.

With a board and membership of leading service providers within the ESG data and ratings space, FoSDA has the muscle to make itself heard in the offices of regulators, policymakers and central banks around the world.

“We are setting an expectation that this is not just an industry in its infancy,” said Macpherson. “We’re talking about an industry that’s been in existence for the last 20-30 years, but it’s only gone into the mainstream focus maybe in the last five to 10.

“We are therefore changing the fundamentals of how we are being perceived and as you know, perception is reality. We are trying to move away from people thinking that ESG is a nascent space – we want to ensure that there is credibility, there is momentum, there’s integrity and there’s an understanding that there is a track record in what these organisations and many of the individuals, including myself, have been doing in and for this industry for the last 20 years.”

New Structures

FoSDA has created a number of working groups geared towards examining best practices, identifying challenges and formulating approaches to advancing different aspects of its work. The data methods working group is dedicated to looking at more than just gaps in the ESG data record but also to helping develop broader concepts round methods and analyses that will improve data provisions.

Another group is focused on taxonomies and looking at ways that data can better serve members’ compliance with them. A thematic and focus working group will consider specific topics within ESG. At the moment, it is busying itself with biodiversity coverage but other themes will be taken up in due course.

The key taskforce, however, will be the policy and regulatory working group, which is co-chaired by Macpherson and Ola Ajadi, head of government relations and regulatory strategy for the UK, Middle East and Africa at London Stock Exchange Group (LSEG). This body is the core team that will engage with regulators and policy makers to ensure FoSDA’s core principles are built into new legislation and oversight rules.

“Ola Ajadi and I, together with the members of FoSDA’s policy and regulatory working group, have set ourselves the aim to engage and to influence key decision making in the ESG policy regulatory debate. We are engaging regularly and very intensively with decision makers in Brussels and in the UK and the ambition is to extend these type of engagement efforts more globally.”

Among one of its first acts is to engage on the EU’s recent proposals related to ESG ratings transparency bringing providers within the gaze of the bloc’s regulators.

Educate and Engage

As well as its lobbying activities, FoSDA plans a full slate of engagement and education programmes to communicate to the industry and wider audiences its principles and the work it’s doing to promote them. That includes the publication of best-practice examples and research reports. It’s already published one on reporting frameworks and standards and another on ESG in sovereign ratings.

Roundtable discussions that bring together market participants and other stakeholders are also planned. The first was held in Brussels and co-hosted with the CDP. More are planned, including one to tackle topics around the EU ratings proposals. Participation in industry conferences, webinars and other thought leadership initiatives are expected later in the year.

As the ESG project grows, and the first expressions of a backlash against it play out, Macpherson expects FoSDA’s importance to grow. It will stick to a simple message that without good data, then the aims of the sustainable finance movement will be without the tools most critical to guiding capital to the products and projects best able to achieve climate and social goals.

“Our aim is to connect financial with extra-financial measures, metrics and frameworks, highlighting the relevance of ESG datasets,” she said.

“We want to be at the forefront of the discussions when and where decisions for the ESG data, ratings and product industry are being made and to take it one step further by actively engaging with decision makers across industry, policy and academia – to ensure our voices, individually and collectively are being heard and taken forward.”

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