Mounting pressure from governments, regulators, industry, investors and customers has driven ESG to the very top of today’s business agenda.
Having initially focused on the Environmental aspects of ESG, Social and Governance considerations are now also key priorities. Moving forward, alignment and compliance with emerging ESG standards will be a critical differentiator for long-term business success across financial, energy and manufacturing markets globally.
Existing approaches to implementing ESG frameworks and best practices are not harmonized across individual markets and regions, however, whether in terms of agreed definitions or pace of adoption. This has given rise to significant challenges when establishing corporate ESG agendas, which in turn hinders financial institutions’ ability to drive green lending and investing.
We are now seeing increased engagement by regulators to align around a more unified approach to ESG. And if regulation is the driver of change, then data will play a key role in delivering the traceability, transparency and insights to validate the ESG credentials of a company, a stock, or an investment strategy.
Financial institutions will need to embrace high volume data processing, drawing upon machine learning and artificial intelligence and leveraging data analysis and harvesting via smart analytics. The scale and complexity of managing and storing data means cloud technologies may also need to be considered as they look to map an optimal path forward to a future model of sustainable finance.
The Taskforce on Climate-Related Financial Disclosures (TCFD) has developed recommendations for more effective climate-related disclosures, subsequently adopted as the de facto standard for reporting climate-related information. Capco has undertaken a high-level review of 33 banks around the world who have committed to producing TCFD-aligned disclosures. This paper assesses each of the banks’ climate-related reporting against six key criteria.
What is the role of a public firm in a free market? Traditionally, the answer would be to maximize value for its shareholders.
This still holds true, but there are now a much broader range of considerations for firms to meet, such as ESG factors, which have developed to a point where they are driving inflection in supply and demand.