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ESG Data: Key to Sustainability Initiatives in Banks

Climate change awareness and conscious consumerism are on the rise in the post-pandemic era. These have made industry stakeholders and policymakers realise that it’s important for businesses to prioritise ESG practices.

The signing of the Glasgow Climate Pact and agreeing on the Paris Rulebook at the COP26 summit further signifies a global commitment toward a carbon-neutral future.

As sustainability becomes the focus of the global economy, financial institutions (FIs) have joined the phenomenon. They are announcing a wave of initiatives, such as:

Increasing commitment by institutions is placed on net-zero pledges.

Phasing and leveraging strategies of zero thermal coal exposures.

Incorporating sustainable business practices into their business strategy.

Committing to disclosures around climate-related risks and opportunities.

Within just 18 months, the largest 30 lenders by assets in the U.S., Canada, and Europe have all signed up to the industry-led, UN-convened Net-Zero Banking Alliance. These net-zero pledges significantly affect FIs’ lending and investment portfolios. They require FIs to track and report to internal and external stakeholders the greenhouse gas emissions linked to their lending and investment portfolios. An effective ESG data platform can streamline this tracking and reporting process, ensuring accuracy and transparency.

FIs also need to optimise their lending and investment portfolios to deliver long-term sustainable investment returns for clients. They must roll out products and services that comply with the ESG criteria. Leveraging an advanced ESG data platform allows FIs to effectively integrate ESG criteria into their offerings, enhancing their commitment to sustainability.

The ESG Data Disconnect

At the core of these sustainability initiatives, financial institutions have to deal with the ESG data challenges. Unlike financial data, ESG data currently does not have generally accepted principles and limited accessibility.

The inconsistency of ESG data further exacerbates the ability to verify and validate the ESG metrics that enterprises report. Several ESG data platforms, ESG startups, and consortiums have stepped in to fill the ESG data gap.

ESG data comes in various forms. FIs potentially need to collect hundreds of datasets from internal and external sources in different formats and data types. Moreover, different reporting frameworks lack standardisation for companies to capture, track, and disclose ESG-related information.

The fragmented reporting landscape, lack of obligation to report ESG data, and self-reporting procedures open up the possibility of ‘green-washing’—a marketing spin involving unsubstantiated claims about environmentally friendly practices.

In addition, ESG data about enterprise behaviour is in constant flux. Even though regulation is evolving rapidly, for many organisations, even compliant ESG reporting and disclosure may not be sufficient to meet sustainability imperatives.

Embed ESG Data in Sustainability Initiatives with NayaOne

NayaOne offers an ESG Marketplace with pre-vetted ClimateTech and ESG Data providers for financial institutions to quickly discover and onboard for innovation projects. It also offers an integrated Innovation Platform and Synthetic ESG datasets to aid rapid experimentation, evaluation benchmarking, and launch of sustainability propositions to customers.