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

‘Light Bulb’ Moment Looms for Data Reporting, Says Solidatus

Subscribe to our newsletter

The financial data industry is experiencing an ESG “lightbulb moment” as regulators and financial institutions get to grips with challenges facing corporate disclosure and data quality, according to Solidatus.

The recent introduction of the EU’s SFDR and, probably more importantly, the Bank of England’s stress tests of lenders’ climate risks are likely to prove a pivotal moment in the maturity of the sector, said Solidatus Chief Data Officer Lorraine Waters.

Her comments build on a white paper the data management company published last month in which it urged reporting companies and data consumers to begin preparing for tighter regulatory oversight of ESG disclosure. Some leading asset managers had got the ball rolling already by publicly taking a hard line on companies that fail to meet strict reporting guidelines, Water said.

“We’ve already seen the likes of Blackrock and Aberdeen and others decline to invest in funds that are not able to meet their criteria for reporting on ESG, and that’s going to continue to happen,” Waters told ESG Insight. “That was a wake-up call.”

Conflicting information

Regulations are still being forged to eliminate challenges facing sustainability and corporate social responsibility reporting. Market participants argue that it’s often difficult to make intelligent investment decisions because there is conflicting information on corporates’ ESG performance. Data is often lacking, requiring data management companies to fill the gaps with estimated and extrapolated calculations. Further, the intel may be difficult to map.

In its white paper, entitled “Practical data strategies for meeting ESG obligations in Financial Services”, Solidatus argues that regulators are formulating policies that will help overcome some of the data challenges. It won’t be long before investors are able to access a unified trusted body of comparable data, the paper states. Consequently, companies need to start budgeting for and working towards building compliance processes and workflows now.

“The ESG investing landscape is poised to become more defined, as competing definitions, standards and regulatory initiatives start to converge,” the paper states. “Given this background, the practical challenge for financial institutions is how to develop and implement an ESG strategy that is both effective and avoids box-ticking – and thus greenwashing risks.”

Stress tests

In the UK, the Bank of England’s Climate Biennial Exploratory Scenario (CBES) is piloting a process of climate risk declarations, requesting 17 banks and insurers to stress test their reliance to climate-related financial risks. The pilot is expected to be used as a template for future full industry reporting.

Although the results are being submitted now, the final reports aren’t expected to be published until the new year.

Industry observers have said the inaugural exercise has worried the institutions and central bankers because it has highlighted shortcomings in data gathering and quality. It’s also exposed banks’ lack of preparation for such a large scale intel-gathering programme (read more about this from ESG Insight here).

Waters forecasts the results, when published, will provide a crucial window into the sector’s shortcomings of ESG reporting.

“We will start to realise, then, where the gaps are,” she said. “Is it in the sourcing of data? Is it the ratings? Is it the internal accessibility of the data? I think it’s going to be a light bulb moment for many.”

In its white paper, Solidatus says that the gathering momentum of regulatory policymaking is bringing coherence to an environment of fragmented data taxonomies and methodologies.

New skills

There are encouraging signs that this process has begun in earnest, the paper states. As well as the SFDR and CBES, it points to the accountancy standard setter, IFRS Foundation, which plans to launch a Sustainability Standards Board at the UN’s COP26 climate summit in November.

One of the white paper’s final observations is that an understanding of data supply chains will be a requisite for companies beginning their compliance preparations. That will require new investment in new skills and workflows as well as a reassessment of decision-making structures, with greater recognition made of the importance chief data officers and their teams.

Once begun, the business of keeping companies compliant will be a huge undertaking, Waters said, comparing it to the implementation of the BCBS 239 risk data aggregation directive.

“In my mind it’s looking bigger than that,” she said “The banks have spent billions on that and still haven’t fully completed the work that needs to be done – and that started back in 2012.”

Do you enjoy this content? Be sure to sign up as a member (it’s free) to get weekly updates and invites to ESG-related events and webinars.

Subscribe to our newsletter

Related content


Recorded Webinar: Managing data governance for ESG

Volumes of ESG data continue to rise, standards and metrics are emerging, and financial institutions must manoeuvre through the maze to source, manage and make best use of ESG data to meet increasing client demand for sustainable investment. They must also adhere to emerging regulations, avoid greenwashing, and integrate ESG data – both structured and...


Broadridge SFDR Solution Takes EET Closer to Universal Use

European ESG Templates (EETs) are fast becoming the go-to means for companies to report their sustainability performances. The digital documents that provide a means for firms to comply with the European Union’s Sustainable Finance Disclosure Regulation (SFDR) form the basis of a growing number of reporting solutions. One of the most recent, by Broadridge Financial...


Data Management Summit New York

Now in its 13th year, the Data Management Summit (DMS) in New York brings together the North American, capital markets enterprise data management community, to explore the evolution of data strategy and how to leverage data to drive compliance and business insight.


ESG Data Handbook 2022

The ESG landscape is changing faster than anyone could have imagined even five years ago. With tens of trillions of dollars expected to have been committed to sustainable assets by the end of the decade, it’s never been more important for financial institutions of all sizes to stay abreast of changes in the ESG data...