The need for high-quality, comparable and dense environmental, social and governance data is key in driving the transition to a net zero economy. To achieve this, mandatory corporate disclosures, alignment with science-based methodologies and greater transparency in favour of nature-positive, common standards are essential.
This was the key message from a panel discussion at COP27 on 9 November, hosted by Future of Sustainable Data Alliance (FoSDA) and CDP. The discussion took place on the COP27 Finance Day and included panellists from FoSDA, CDP, S&P Global, London Stock Exchange Group (LSEG), Moody’s and Climate Bonds Initiative.
The need for high-quality, comparable and dense environmental, social and governance data is key in driving the transition to a net zero economy. To achieve this, mandatory corporate disclosures, alignment with science-based methodologies and greater transparency in favour of nature-positive, common standards are essential.
This was the key message from a panel discussion at COP27 on 9 November, hosted by Future of Sustainable Data Alliance (FoSDA) and CDP. The discussion took place on the COP27 Finance Day and included panellists from FoSDA, CDP, S&P Global, London Stock Exchange Group (LSEG), Moody’s and Climate Bonds Initiative.
Opening the session, Pietro Bertazzi, Global Director of Policy Engagement and External Affairs at CDP, noted that sustainability disclosure has become an accepted norm among businesses, followed by a dramatic change in how capital markets assess risks and opportunities. With ESG information playing a vital role, there has been an increased scrutiny over how disclosed data is used by ESG ratings and data product providers.
Sherry Madera, FoSDA Chair, underlined that data collection is a strong foundation for all sustainable standards, frameworks and taxonomy codes. FoSDA, which advocates for data within sustainable finance, is launching two reports on corporate and sovereign ESG gaps. How to obtain data that can be compared at the country level and not just at the corporate level is a key component of thinking about net zero. ‘We want harmonisation – but let’s get the data right first,’ Madera said. She also stated that data is not the problem – it is the solution. We need to ensure we focus on the quality and density and avoid making data sustainable finance’s enemy.
‘Saying and not doing is greenwashing, doing and not saying is green hushing. We need to say and do, and providers of sustainability intelligence need to assess whether market participants are seeing and doing,’ urged Richard Mattison, President of S&P Global Sustainable1. He noted that not many financial institutions factor nature into their decision-making. Greater transparency about what it is to be net zero and what it is to be nature positive is critical.
There are still major gaps in the data. Over 40% of the largest 4,000 listed companies don’t provide data on carbon emissions. In China, only 10% of companies provide this information. ‘Voluntary disclosure is not good enough. We need mandatory disclosure globally. We’re calling for every government in the world to implement mandatory climate reporting disclosure by 2025,’ said David Harris, Head of Sustainable Finance Strategic Initiatives & Partnerships, LSEG. He also called for sensible regulation and common standards through the International Sustainability Standards Board. To support this work, LSEG plans to dedicate funding to ISSB over the next three years.
‘Investors have different needs from ESG scores and ratings, such as a focus on financial materiality vs a focus on ESG performance, i.e. incorporating broader environmental and social impacts. Therefore, the aim is to harmonize the standards for data and disclosures, and not necessarily the opinions created from them,’ noted Swami Venkataraman, Associate Managing Director, ESG, Moody’s Investors Service.
The need for comparability of ESG ratings and access to open data versus data behind a paywall were important topics at the panel. The panellists also discussed the need for alignment with science-based methodologies, the temporality of data sets and the missing middle (a data gap existing between short-term financial planning and longer-term net zero alignment targets).
‘We’ve lost the fight against climate change – we’re going to get 1.5, probably 1.9 degrees warming. We have to prepare,’ warned Sean Kidney, Co-founder and CEO of the Climate Bonds Initiative. Governments globally must have an aggressive transition plan, which is reportable and has data available so it can be tracked and interrogated. Technology, geospatial data, key performance indicators of data durability, data availability and the usability and variety of ESG ratings will play a key role in closing the data gap and driving the transition – but the financial sector must act now.