Financial institutions play a critical role in global sustainability and are making progress in ESG investment, yet significant challenges remain, not least the need for more and better data, and a common regulatory reporting framework.
Jason Channell, managing director, head of sustainable finance, Citi Global Insights, at Citi, discussed the strategic imperative for capital markets participants to take a key role in developing sustainability with A-Team Group president and chief content officer Andrew Delaney during a fireside chat at A-Team’s recent ESG Data and Tech Summit London.
Channell set out the state of play in ESG saying: “The public sector needs to set a framework and maintain impetus to make the direction of travel clear. The private sector is arguably making fastest progress, with the financial sector critical to achieving economic sustainability.”While financial institutions previously ran sustainability and finance in parallel, Channell noted that they are now integrated in the financial community, with a focus on the risks of stranded assets, and the opportunities presented by a net-zero future. On the Paris COP agreement, he commented: “The money was in the room, focusing on risk and opportunity, and an end goal.”
Breaking down the E, S, and G of ESG, Channell noted that governance is doing well in developed markets with emerging markets needing to catch up; interest in social, including health, education and gender equality, has risen as a result of the Covid pandemic; and the EU is leading on environmental issues, although the US is catching up.Considering the challenges of ESG, data is a major issue, with more and better data needed by financial institutions to ensure regulatory compliance and meet their sustainable objectives. There will not, however, be a silver bullet when it comes to ESG datasets. Channell explained: “Firms will find datasets they need, but they will need to do their own work on them depending on what their individual goals are in ESG.”
Regulation is also an issue, with Channell describing the plethora of EU and UK regulation as “overly complex”, but suggesting this will improve for all jurisdictions with direction from organisations such as the GRI, Sustainability Accounting Standards Board (SASB) and International Sustainability Standards Board (ISSB) on global standards for ESG regulatory reporting.
He concluded that as the transition from investment in brown sectors, such as oil and gas, to green investment continues, it will be possible to make the economy more sustainable.
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