Financial institutions face a new set of ESG data management challenges even though data sourcing has become easier as the sustainability sector has matured.
While more data is available to firms, thanks to a combination of new reporting regulations and standardisation of disclosure frameworks, the increasing variety of information needed and the volumes in which it will be delivered means that the pressure on data managers to get this information into their systems is unlikely to abate any time soon.
In our next ESG-themed webinar, A-Team Group’s Data Management Insight, we will examine the state of play for institutions as they grapple with the implications of this new data sourcing landscape. Among the speakers, Ángel Agudo, board director and SVP of product at Clarity AI, explained that while obtaining ESG data had become somewhat easier, there are still areas in which vendors can add value.“We are still in the early stages, and there are still limitations in how companies report their data,” Agudo told Data Management Insight. “So there remains a need to put all that unstructured data together to make it comparable and to complement what’s missing. That means there will be a need to emulate that data through estimates and leverage other sources of information, which could include reports of other organisations, NGO information, news, asset-level data – and more. Ultimately, investors need to make sure the data sourced is fit for purpose.”
Transformation
Agudo will be among a panel of three experts on the “ESG Data Sourcing and Management to Meet your ESG Strategy, Objectives and Timeline”, webinar, which will be held on June 11. The other speakers comprise Aria Goudarzi, SVP and head of ESG data at Neuberger Berman, along with Neil Sandle chief product officer at Alveo.
The sourcing of ESG data has undergone a transformation in the past few years. The space was initially provisioned by established financial data providers. Their one-stop-shop approach was eventually supplemented by the arrival of innovative providers of ESG-specific datasets and analytics. Clarity AI is among those, offering clients tech-based end-to-end solutions, for more sophisticated use cases and a higher degree of flexibility to swiftly adapt to changing market needs and requirements.
Other relative newcomers offer customised datasets that are focused on specific ESG themes that are becoming more central to institutions’ investment and risk processes, such as nature and biodiversity, human rights and diversity.
The chain of processes required to enable the integration of ESG data into firms’ wider data estate is something that Agudo said needs to be addressed at the sourcing stage, rather than left until it has been ingested into data management systems. But he says the challenge lies in achieving this while also adhering to the firm’s overriding needs-based data management methodology.
“You can manage data in the most standardised way possible and there are many platforms that already offer those capabilities. However, embedding the methodology into the data management process is the challenging part,” he said. “Making sure that you process all that information and can integrate it in a way that aligns with the methodology, providing you the right insights, is difficult.”
Easier Process
Nevertheless, institutions are benefiting from a greater convergence of elements required to widen the pipeline of ESG data and increase its availability.
The creation of reporting guidelines by the IFRS’ International Sustainability Standards Board has helped to dovetail several often-competing disclosure codes into one set of guidelines. These are being integrated into regulations being constructed by regulators around the world.
And on the regulatory front, the European Union’s Corporate Sustainability Reporting Directive, which compels 50,000 companies to begin disclosing their ESG performance data, is expected to provide a template for other jurisdictions to encourage greater data submissions.
“Now that we can start measuring and understanding companies’ ESG performance better, investors need to grow their knowledge of the dependencies of all those metrics and the implications for their own investment decisions,” he said.
“It will be interesting to see the new dynamics with companies and how service providers can support answer those questions that are coming to the table now.”
- The “ESG Data Sourcing and Management to Meet Your ESG Strategy, Objectives and Timeline” webinar will be held on June 11, 2024, at 10:00am ET / 3:00pm London / 4:00pm CET. There’s still time to subscribe, by clicking here.
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