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

Corlytics, First Derivative Win Funding for ‘Groundbreaking’ ESG Taxonomy Project

Subscribe to our newsletter

RegTech provider Corlytics and managed services group First Derivative have received funding to jointly develop an open-source ESG taxonomy mapping project.

The companies received a “reasonably considerable amount” from Irish advocacy group Sustainable Finance Ireland (SFI). The money will help build out what the companies describe as the world’s first open-source taxonomy tool.

Once compiled, the project will be handed to the open source community for streamlining. It will be updated every three months by SFI, a public body that supports the development of Ireland’s impact investment industry. The aim is for it to be accessible by any financial institution.

Corlytics’ Dublin-based Chief Executive John Byrne told ESG Insight that the idea was born of the need for an ESG compliance framework like those that exist for anti-money laundering and other regulations.

“There’s no rigour to the ESG process at the moment,” Byrne said. “We want to make it useful to the whole industry, so that they can actually start automating their processes.”

Market Obstacle

The proliferation of ESG taxonomies created by organisations such at the Taskforce on Climate-Related Financial Disclosures and the European Union’s own EU Taxonomy, is seen by some market participants as an obstacle to the further development of ESG investing. Without universally comparable datasets it is difficult for investors to make comparisons between corporates’ sustainability and corporate social responsibility records.

Financial institutions will be able to use the Corlytics-First Derivative framework to analytics and automated systems, the developers said.

“Our vision is game-changing, we have put open source at the centre of our strategy to help everyone better manage the transition, mitigate risk and work faster to achieve a net zero future,” said Johnny Mattimore, Managing Director and Global Head of Risk & Sustainable Finance at Newry, Northern Ireland-based First Derivative. “It showcases our unrivalled capabilities of bringing together people, data and technology into a single powerful solution.”

The EU taxonomy has come closest to providing an international framework, but the delay of the publication of the regulatory technical standards that will underpin it has caused concern and uncertainty among asset managers.

No Rival

Byrne said the Corlytics and First Derivative service was not intended as an alternative to any of the taxonomies already published. Instead it’s hoped the project will knit them together.

“It feels like there’s a new body appears every three months saying ‘we’re going to answer everybody’s prayers and build a perfect taxonomy for financial disclosures in, say, greenhouse gases’,” Byrne said.

“Our idea is to see how much overlap there is between them. It’s not necessarily that they don’t join up, but one may have a different set of limitations than another.”

He illustrates that point with reference to measurements of greenhouse gas emissions. While there are seven greenhouse gases, most taxonomies are only looking at carbon dioxide. Also, many look only at emissions and only some detail carbon intensity.

“There is no such thing really as a like for like comparison, there are similarities and differences everywhere,” he said.

For the time being the two companies will work on the project but once handed to the open source community, others are likely to get involved and help shape the framework. And as the nature of the ESG space changes, so will the taxonomy, Byrne said.

“We not creating something – we’re really reacting to what’s there, and then trying to join things up,” he said. “It’s all fine when ESG standards are conceptual, but sooner or later people are going to have to start generating reports on this.”

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Strategies and solutions for unlocking value from unstructured data

Unstructured data accounts for a growing proportion of the information that capital markets participants are using in their day-to-day operations. Technology – especially generative artificial intelligence (GenAI) – is enabling organisations to prise crucial insights from sources – such as social media posts, news articles and sustainability and company reports – that were all but...

BLOG

Critical but Challenging – Managing Unstructured Data: A-Team Webinar Preview

Unstructured data accounts for an estimated 80 per cent of companies’ data estate and the volume of that information is forecast to grow by a third each year. Consequently, management of the class of data that is being culled from sources as diverse as financial reports and social media posts has become a pressing challenge....

EVENT

TradingTech Briefing New York

Our TradingTech Briefing in New York is aimed at senior-level decision makers in trading technology, electronic execution, trading architecture and offers a day packed with insight from practitioners and from innovative suppliers happy to share their experiences in dealing with the enterprise challenges facing our marketplace.

GUIDE

Valuations – Toward On-Demand Evaluated Pricing

Risk and regulatory imperatives are demanding access to the latest portfolio information, placing new pressures on the pricing and valuation function. And the front office increasingly wants up-to-date valuations of hard-to-price securities. These developments are driving a push toward on-demand evaluated pricing capabilities, with pricing teams seeking to provide access to valuations at higher frequency...