ESG data strategy: Emerging initiatives and lessons learned from the leading institutions

Addressing ESG & sustainability objectives and building a sustainable financial system requires a solid ESG information architecture based on high-quality, reliable and comparable data.

However, the lack, transparency and costs of ESG data can be significant challenges preventing firms and banks from properly performing their sustainability, ESG and climate related activities. Some data just does not exist yet, some is difficult to trust and some is just too difficult to get. And these challenges are often rather segment specific; whereas corporate sector data is becoming more common thanks to the upcoming ESG disclosures, the data for SME and retail segments are more problematic. 

Nevertheless, the disclosure requirements and regulators are pushing banks to move ahead despite this lack of data, and thus banks often have to rely on imputing the missing information using proxies expert, judgements and models, and thus make decisions based on incomplete data.

“While there are risks to acting on the basis of partial climate risk data, the risks of inaction are greater,” saidFrank Elderson, Vice Chair of the Supervisory Board of European Central Bank

In his presentation, Nicolas Renous from TNP Consultants, in cooperation with which we have been building the whole Sustainability & Regulation Community, shared key ESG data observations and trends from the market, introduced the wide panorama of ESG data types and discussed the main challenges banks face in having a structured approach regarding ESG data and integration in global data governance.

“Today there are more than 600 ESG reporting frameworks worldwide,” said Nicolas Renous.

Nicolas concluded his presentation by providing practical tips for efficient ESG data management within an organization.

During the event, via poll survey, we also collected valuable perspectives from the online participants on the level of harmonization of ESG data governance within their organizations. The results confirmed the variety of maturity levels among the banks, with the majority being in the early stages.

In the panel discussion, Nastassja Cernko was joined by Sandra Shoonhoven, COE Lead Climate Risk Initiative Global Sustainability from ING, and Philip Winckle, Senior Advisor from GCD, who both reflected upon the presentations and the poll result and shared their perspectives on ESG data challenges and approaches to tackle them.

In particular, Sandra from ING brought in the perspective of a global financial organization and explored the ESG data challenges they face from the dozens of distinct markets they operate in and complexities related to the lack of data standardization and harmonization. 

“There are many single points of truth popping around the world,” said Sandra Shoonhoven, COE Lead Climate Risk Initiative Global Sustainability, ING

Philip from GCD, a consortium of 55 global banks that share and pool their credit risk data to improve the quality of their credit risk models and decisions, shared his experience and relevant lessons learned from Basel, IFRS 9 ECL global data collection and pooling exercises, and related them to current challenges around ESG data and the emerging industry data pooling and sharing exercises on the global scale.

“We need the data we do not even know we need,” said Philip Winckle, Senior Advisor, Global Credit Data.

ESG data challenges are not going away anytime soon, and financial institutions cannot afford to wait till they get resolved. However, from the perspectives shared and discussions led by our experts it became clear that there are emerging initiatives and lessons learned already available from the leading institutions that can be leveraged now to provide valuable support in addressing the current challenges faced with ESG data. 

Watch the webinar's replay