Financial Institutions' Awareness of ESG has Increased

The Business for Good – Unlocking the Sustainable Impact of ESG Data webinar invited Olivier Ménard (Head of the Green & Sustainable Hub, Natixis Corporate & Investment Banking), Karen Ho (APAC Head of Buy-side Researcher & ESG Market and product Specialist, Bloomberg LP), Kristy Wong (Associate Director, ESG Investment Specialist, Amundi), Amy Zhang (ESG Solutions & Product Strategist, Société Générale) as guest speakers and moderator Helina Lo (Managing Director, Sia Partners) to share and explore the options to manage ESG data roadblocks.

Sia Partners presented key challenges that most companies face around ESG, followed by Olivier Ménard, Head of the Green & Sustainable Hub at Natixis, sharing the following; “with the increasing regulations on ESG all pushing towards ESG taxonomy standardization and harmonization, a repository tool should be put in place to enable all financial or ESG data to be inserted as a single-entry point, for data accuracy uplift and benchmarking purposes.”

Amy Zhang, ESG Solutions & Product Strategist at Société Générale echoed the concerns around data quality. Layers of consideration should be applied to ensure data quality. “You have to understand what is behind the methodology, assumptions, and limitations and understand which ESG questions your clients are trying to address. There is always a big data availability issue in global markets when we create products.” Typical issues encountered include scarce data in certain asset classes and geographic regions, and less mature data for bond issuers as more stringent ESG data disclosure requirements are being imposed on equity issuers.

While there has always been heated controversy over ESG ratings, ranging from their easy manipulation to non-transparent calculation methodology, Associate Director & ESG Investment Specialist at Amundi, Kristy Wong, shared that her company has integrated almost 15 external data providers' scoring to increase their confidence in ESG ratings. “We developed our own proprietary ESG scoring methodology based on a best-in-class approach.”

When asked about how data providers could ensure comprehensive data sources to deliver quality ESG scores and ratings, APAC Head of Buy-side Researcher & ESG Market and product Specialist of Bloomberg LP, Karen Ho explained that “one of the impediments to quality ESG data is the unstandardized and unstructured presentation of the data scope. As a result, manual work is required to validate the information usually via public filing rather than private presentations. Due diligence in setting business rules, comparison of the historical data, and understanding the data is indispensable.”

The French Chamber of Commerce and Industry (The Chamber) has invited a diverse panel of experts who proposed ways forward and sustainable solutions to the problems and challenges of developing/using ESG data. In summary, to maximize the sustainable impact of ESG data and minimize report falsification, a sound data governance structure and an effective data quality management strategy would be essential for all financial institutions. Sia Partners has developed its suite of ESG data solutions to support clients in implementing data strategy with the focus on ensuring data quality and breaking integration barriers. For instance: 

• Build agile governance: Establish a data governance framework that ensures fit-for-purpose data inputs across ESG operational processes.
• Uncover transparent data flows: Bring together the impact of ESG initiatives and identify a single source of truth for ESG data.
• Conduct a process-based analysis: Put in place anti-fragile operational practices and data cleansing that assure 'quality-out'. 
• Design a robust data architecture: Assure implementation of a virtuous cycle of data quality improvement with market best practices. 
• Enable quality regulatory & disclosure reporting: Identify data gaps, and automate reporting and related data transformation capabilities in line with the existing stack. 
• Integrate ESG into the risk management ecosystem: Align business and ESG priorities, develop environmental and social impact risk policies and procedures, and perform stress tests and scenario analysis processes.