Alveo has expanded its ESG data integration services in one of the first moves by a data management solutions specialist to help its banking and asset management clients meet imminent new European sustainability regulations.
The London-headquartered company has integrated Intercontinental Exchange’s (ICE) ESG company data analytics into its data management solution, called Prime. The new integration will enable Alveo customers to access the ESG characteristics of instrument-level data and link it to issuing companies.
The deal, which extends Alveo’s long-standing relationship with ICE, will see the Atlanta-based financial information and exchange giant’s European Union (EU) Sustainable Finance Disclosure Regulation (SFDR) data and EU Taxonomy information integrated into Alveo’s solution. This includesthe Principal Adverse Impact Indicators (PAIs), required by asset managers and asset owners to comply with the SFDR. This is essentially a set of metrics on how investment products perform against a number of ESG criteria.
Alveo vice president for marketing and strategy Martijn Groot said that while the cooperation between ICE and Alveo would make SFDR compliance for the buy-side easier, it would also be very helpfulfor banks. Banks require ESG data as part of their customer onboarding, for climate stress testing and for their loan book reporting.
“Our clients are asking us to help aggregate ESG information, cross-reference between different instrument identifiers, link to issuers and parent entities and run different business rules to check quality and derive custom scores. We are also getting more and more questions about company activity data so that banks can map their loan books to the EU Taxonomy to assess which part of their loan book is green,” Groot told ESG Insight.
Green Lending
The European Banking Authority (EBA) has given the green light to new regulations aimed at bringing disclosure rules for loans in line with those for companies covered by the SFDR. Banks must demonstrate how the companies to which they lend should be regarded by the EU Taxonomy – the EU’s foundational regulation that identifies which business activities can be considered sustainable.
Draft regulations require that banks demonstrate the sustainability of their loan books via a green asset ratio (GAR) and a banking book taxonomy alignment ratio (BTAR).
Current finance and banking regulations have created an ESG disclosure “mismatch” between the borrowers and issuers of publicly traded securities and investors, said Groot. While the upcoming Corporate Sustainable Reporting Directive (CSRD) would help bring in more information from such companies, gaps would remain and financial services firms will require metrics from the companies they lend to or invest in that those companies do not yet have to disclose themselves.
“The companies covered by CSRD will include those issuing bonds, but if you go to the banks’ banking books, a lot of those won’t be issuers of public securities,” he said. “That creates a mismatch and a need to use data aggregation services.”
Broader Model
The latest ICE data is integrated to Alveo through its XML-based Apex offering.
“We have always had a data model focused on financial instrument data, issuer data, corporate actions, pricing, and other data,” he said, that has now been “heavily expanded to include not just the PAIs andother regulatory required fields but also hundreds of other ESG characteristics.”
Financial institutions will be expected to begin reporting on their PAIs from June, and the banking regulations will come into effect next year. But Groot said Alveo’s latest update to its model would also enable financial services firms with asset selection and client reporting.
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