The battery of ESG and financial regulations introduced in the past few years – and the future rules already in an advanced state of preparation – are weighing on institutions as the threat of censure for breaches increases.
But a team of FinTech specialists has come up with a novel approach to helping all parties, from asset owners and managers, to vendors, consultancies and regulators, navigate the increasingly treacherous regulatory waters. Co-Labs was established in the spring as a FinTech “ecosystem”, and is envisaged as a collaborative environment where buy-side and sell-side firms can access shared services and tools, and speed up the time to value.
The initiative is the brainchild of Sarah Sinclair, inspired by the Bank of England and Financial Conduct Authority’s 10-year initiative to transform data collection across the financial services industry. Sarah, together with founding partners such as Neill Vanlint of GoldenSource, have enviable track records in creating and managing financial data, software and RegTech solutions for financial institutions. Due to go public later in the autumn, Co-Labs is already providing a “collaborative space” where solutions to regulatory challenges can be co-created and where regulators can get a better understanding of the needs of the industry they seek to protect.
“The anchor of Co-Labs is risk and regulation because institutions all face these same burdens – they are two sides of the same coin,” Sinclair told ESG Insight. “At the moment firms feel like they are walking through the fog, not knowing how to embrace technology and not having clarity about what each vendor does or how effective they really are. So, Co-Labs is about bringing companies together, solving common challenges with a greater impact via collaboration.”
As well as solving for ESG reporting challenges, Co-Labs will focus on helping its subscriber partners address their many other risks such as economic crime, operational resilience, prudential reporting. It has already established a roster of vendors and other sell-side subscribers and has just begun inviting buy-side firms. Regulators are also in position to observe and benefit.
“By taking a use-case approach, we’re providing opportunity for consultancies, firms, vendors, and regulators to really gain fast momentum around the use case they most urgently wish to solve,” Sinclair said. “Co-Labs is designed to create a new reality which is a world away from today where every firm picks up the rulebook and sets out to implement it all themselves, which is costly and prone to error.”
Regulatory burdens are mounting for financial institutions. In ESG alone, the number of regulations has more than doubled in the past decade and more are on the horizon. Updates are expected in Europe over the next 12 months to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence (CSDD) directive and the recently created European Sustainability Reporting Standard (ESRS). The UK and US are also putting the final touches to their own sustainability reporting regulations and, in Britain, a code of conduct for ESG ratings providers is in the works.
Co-Labs will provide subscription access to a cloud-based digital platform, connecting partners to its value-added data, technology and services. With visibility into the collaborations between partners, Sinclair said the platform will also show trends and developments in creative ways that can further help inform decision makers.
“With certain vendors, consultancies and firms, as they participate, we’re going to be getting a much broader and deeper view on the pain points and how solutions are helping,” she said.
Sinclair, who is also co-founder of Change Gap, a consultancy that helps financial services companies find solutions to process, data and tech challenges, said that Co-Labs will not be a marketplace where it will resell partners’ services but will act as an “honest broker”, providing the space and tools for firms to find the answers, clarity and services they need.
Part of Co-Labs’ mission is also to bring companies together physically, to prove the value of connecting like-minded parties around use cases. Already it has hosted a number of informal themed talks and gatherings in London. A recent one focused on ESG data saw guest speakers from Portuguese sustainability management software provider C-More as well as global data management provider GoldenSource.
Sinclair explained that inclusion from the start, of jurisdictions around the world, aided by a network of international hubs, is key to solving use cases for multinational firms – which is currently a major gap across the data and technology vendor space. As well as the London hub, Sinclair has partnered to create one in Singapore and plans are in hand to establish others in New York, Toronto and Vancouver soon. An African hub is also in the works, with Sinclair recognising opportunities to truly collaborate with a continent that holds huge promise for FinTech and RegTech development.
“You need people to lead people to the cloud,” she responded when asked why a digital platform needed global hubs. “Co-Labs will help firms – both large and small, who are chained to their desks using spreadsheets. Nothing happens without people.”
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