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ESG data trends and challenges discussed at NYC Climate Week

Environmental data collection and disclosure has been booming. Companies have honed using ESG data and benchmarking themselves against their peers. Investors and governments have been driving change and an increased focus on sustainability data disclosures through demand and regulations. Data coverage globally, and especially within Asia Pacific, has increased while more countries have introduced mandatory disclosure requirements.  Asset-level data is increasingly in the spotlight. However, there is still more to do to advance the availability and quality of ESG data.

Translating ESG data into decision-useful financial considerations, addressing supply chain blind spots and Scope 3 data gaps, encouraging credible climate transition plans and measuring real impact, as well as using emerging AI tools and technology solutions and ensuring convergence and interoperability of policy frameworks are steps that can help on this journey.

ESG data trends and challenges were the focus of the panel discussion, ‘ESG data: The Bedrock for Ambition, Credibility and Implementation’ hosted on 18 September by the Future of Sustainable Data Alliance (FoSDA), CDP and S&P Global at the margins of the 78th session of the United Nations General Assembly (UNGA) and as part of Climate Week New York. The panel was moderated by FoSDA Chair – and as of 2 October, CDP’s new CEO – Sherry Madera and brought together speakers from across the sustainability data ecosystem.

Sonia Kim, Global Head of Product Development at S&P Global, spoke about the ESG data value chain and the use cases that they see across their customer base. She noticed progress and evolution in the adoption of data by customers. For financial institutions, the focus is on translating ESG data into financial terms and integrating it into risk management and risk-return analysis. Some of the challenges are related to transparency, data gaps and the demand for raw data access. ‘As a user of data, you need to know – where it came from, what is the source data, and what’s been done to that data to make decision useful?’ There are supply chain blind spots and issues related to Scope 3 measurements that need to be addressed to translate data into actionable insights.

Trends in environmental data were explored by Nicolette Bartlett, Chief Impact Officer at CDP.  Nicolette referenced the considerable growth in data collection and disclosure across the Asia Pacific region, noting improvements due to supply chain demand, government support and push from local stock exchanges. The previously existing data gap is closing. Another prominent area is nature-related disclosures and investors are driving this change. In 2022, more than 18,000 companies disclosed through CDP on climate change, with almost 4,000 disclosing on water security and over 1,000 disclosing on forests. More progress needs to be made on transition plans – according to CDP’s research, only about 1% of companies have disclosed credible climate transition plans.

‘For every material climate and environmental risk and externality we need comprehensive, global data around exposures,’ emphasized Ben Caldecott, Director, Sustainable Finance Theme at the Alan Turing Institute & Global Research Alliance for Sustainable Finance and Investment. He suggested clarifying what data should be open and publicly available and where market competition can drive data quality improvement. Additionally, according to the speaker, more focus should be on measuring the impact of companies and investments and the datasets needed for this purpose.

Another area of paramount importance is committed emissions and carbon locking. Companies need to be assessed not only based on their current emissions but also on how their capex plans and their business strategies can lock in future emissions.

‘If data is the bedrock, then obviously, nature data is the bedrock of the bedrock,’ said Simon Zadek, Executive Director of NatureFinance. He talked about the complexities of the analysis of biodiversity and nature-related data for investment decisions and explored the role of the TNFD framework. While there are data gaps related to biodiversity, there are top-down approaches and emerging AI platforms. Data gaps are not a showstopper in the analysis of nature and biodiversity-related risks, dependencies and impacts.

Panellists also delved into the topic of evolving regulation in sustainability data, highlighting the importance of baseline standards, convergence of regulations and challenges faced by SMEs. Technology and data-driven solutions can assist stakeholders to gain insights and plug data gaps – so long as there is transparency in the data behind the data.

Collaboration and innovation will keep driving progress in the ESG space. ‘This is exactly what FoSDA does; it brings together parties interested in sustainable data and the financial data ecosystem.  FoSDA’s global footprint allows for a truly inclusive discussion about data as the foundation of good sustainable finance,’ concluded Sherry Madera. ‘Let’s try and keep ESG data as the centre of our discussions beyond Climate Week.