About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Audit Risk Platform Adds ESG Functions of Use to Investors

Subscribe to our newsletter

A regulatory risk assessment platform for UK-based auditors has been upgraded with ESG functions that can be used in financial institutions’ due diligence processes.

RegTech provider Ideagen has made it possible for clients to isolate non-financial reporting requirements from a broader checklist of compliance expectations of companies large and small. The functionality has been created because UK sustainability regulations are embedded in a complex variety of laws that firms often struggle to identify.

The platform is mostly used by auditors to help their own clients navigate the many regulations with which they must comply. But Tina Whitington, senior technical accountant at Nottingham, UK-based Ideagen, said the new service would be useful for financial firms as they look for potential investments or for risk screening.

“It’s about what an entity has to disclose in their annual report and financial statements at the year end, so if I’m an investor I might use the tool to identify what I’m expecting to see in their accounts,” Whitington told ESG Insight.

“All the non-financial information is normally included with financial data – the full things you need to have in your annual report. The new ESG checklist was designed to enable people to pull out just the non-financial information more easily at the beginning.

Regulatory Push

Ideagen is among companies that are using technology to help companies overcome an anticipated swathe of sustainability regulations in the UK and across the world. As the impacts of global warming become more apparent, and the financial industries rise to provide solutions, regulators are putting frameworks in place to ensure capital is fairly allocated by investors.

The regulatory push is also stimulating the generation of more data, which is in turn helping investors identify the projects and companies best suited to supporting efforts to address the climate crisis. The European Union’s Sustainable Financial Disclosures Regulation (SFDR), for instance, compels financial institutions to report data on the assets they own or manage.

While the UK has no sustainability-specific regulation yet, companies are still obliged to report on aspects of their ESG performance through statutes such as listing rules, the Companies Act and Disclosure Guidance and Transparency Rules.

Ideagen’s platform, called Pentana Disclose, has been created to enable companies to avoid censure for missing disclosure obligations. It generates reports from a checklist of questions that are designed to establish what regulations a company is subject to. Users input data on the company and Ideagen’s technology can identify the applicable laws and regulations.

The reports can be used to help financial institutions identify the ESG regulatory risks of a company or asset issuer.

“For a particular type of entity, they’re thinking of investing in they can run the report and see what they should expect to find” in the company’s annual report, said Whitington.

The checklist report will also give an indication of where companies are going beyond their regulatory obligations to report more ESG information than required. This, said Whitington, would give additional direction towards potential investments early in the due diligence process.

Greenwashing

Ideagen expects the new addition to its service will help companies to avoid accusations of greenwashing by giving them the tools to be transparent in their financial reports.

“Greenwashing is not caused by companies trying to hide what they’re doing,” said Whitington. “It’s just that they don’t really know what they’re supposed to be doing and they end up either giving too much information or not enough of the right information.”

The platform is regularly updated to take account of new legislation that will have an impact on companies’ compliance processes. Among developments being closely watched by Ideagen is the International Sustainability Standards Board, which is expected to announce its reporting standards framework in the summer.

“When that kicks in, that’s going to be quite detailed,” said Whitington. “There’s going to be a lot of stuff to do depending on your industry – and it’s going to be, I think, quite unnerving for a lot of the smaller companies who aren’t used to looking at it.”

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: How to develop a reporting framework for ESG disclosure regulation

ESG reporting is a challenge and additional burden for many financial institutions as regulations continue to evolve, ESG data management is complex, and global standards remain elusive. Helpful solutions include reporting frameworks that support the collection, understanding, and management of ESG data for disclosure. This webinar will provide practical guidance on how to build a...

BLOG

Ground-Breaking Standard Setter TCFD Given Warm Send-off

The king is dead; long live the king. At the end of this year the Taskforce for Climate-related Financial Disclosures (TCFD) will cease to exist but its operations will be continued by the International Sustainability Standards Board (ISSB). The standard setter’s dissolution eight years after its creation has prompted a wave of reflection within the...

EVENT

Buy AND Build: The Future of Capital Markets Technology, London

Buy AND Build: The Future of Capital Markets Technology London on September 21st at Marriott Hotel Canary Wharf London examines the latest changes and innovations in trading technology and explores how technology is being deployed to create an edge in sell side and buy side capital markets financial institutions.

GUIDE

Evaluated Pricing

Valuations and pricing teams are facing a much higher degree of scrutiny from both the regulatory community and the investor community in the glare of the post-crisis data transparency spotlight. Fair value price transparency requirements and the gradual move towards a more harmonised accounting standards environment is set within the context of the whole debate...