Last month Capco was proud to be named Best ESG Data and Technology Consultancy in the A-Team Group’s ESG Insight Awards 2024, following a similar success in 2023.1 To receive this year’s award, we attended the ESG Data & Tech Summit in London, which brings ESG specialists together to explore how financial institutions are adapting to fast-evolving regulatory and market infrastructure.
The event offered a chance to meet like-minded businesses and institutions, assess industry priorities, and hear a wealth of insights. Here are some of our key takeaways.
EVOLUTION OF REGULATORY FRAMEWORKS – DATA CHALLENGES
As regulatory frameworks continue to evolve, stakeholders are grappling with the intricacies of categorizing economic activities based on their sustainability performance. The summit discussions surrounding the evolution of the EU taxonomy and progress on the Sustainable Finance Disclosure Regulation (SFDR) were particularly enlightening, highlighting the need for both transparency and accountability in ESG reporting.
However, the sessions also underscored the data challenges inherent in implementing frameworks around the world, given the fragmentation of regulation across jurisdictions and also contradictions between regional and federal legislation (particularly in the US).
Financial institutions need standardized, high-quality data to drive informed decision-making. They also need to become more efficient in managing the data they use to report ESG metrics, while ensuring that overlaps and differences (such as granularity of reported emissions) are understood.
HARNESSING AI FOR ESG DATA MANAGEMENT
The emerging role of artificial intelligence (AI) in ESG data management is difficult to overstate. A dedicated session explored the myriad ways in which AI is transforming ESG analytics, from streamlining data collection processes (e.g. through natural language processing of reports and questionnaires) to generating actionable insights.
By harnessing the power of machine learning algorithms, firms can sift through vast troves of data, identifying patterns, trends, and risks with unprecedented speed and accuracy. However, many speakers sounded a note of caution. AI is not suitable to apply to all ESG data challenges, particularly when calculations and processes must be fully transparent, e.g. when reporting to governing bodies.
Capco’s experience in the AI space is helping us to guide clients towards solutions that are ethical and that also use the most appropriate technology for the challenge in hand.
PROGRESS IN MEASURING AND REPORTING GHG EMISSIONS
Measuring and reporting Greenhouse Gas (GHG) emissions is clearly critical. However, a key area of weakness is the coverage of Scope 3 emissions – indirect emissions outside energy purchases – and the various sub-components. Many companies are currently unable to report these metrics accurately at the level required.
The session provided a comprehensive overview of methodologies, standards, and best practices underpinning Scope 3 accounting for the entire value chain. Encouraging progress is being made in developing robust measurement frameworks, and this should help solve a key pain point in today’s reporting processes.
BIODIVERSITY AND TNFD INTEGRATION
The summit shone a spotlight on biodiversity and its integration into decision-making processes.
With the emergence of initiatives such as the Task Force on Nature-related Financial Disclosures (TNFD), there is growing recognition of the need to incorporate nature-related risks and opportunities into corporate strategies. The relevant session underscored the intrinsic link between biodiversity conservation, sustainable development, and financial stability, urging stakeholders to embrace a holistic approach to ESG integration.
In particular there was much discussion about taking lessons learnt from climate reporting (such as understanding the availability of data and how it can be used in wider business processes) to build a strong foundation for nature-related disclosures, if and when they become mandatory. Financial institutions are just starting to understand how this data can be used to drive their own decisions and should position themselves to explore the challenges and opportunities ahead.
If you are interested in discussing with Capco your ESG Data needs please contact our team via the form below.
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