What a future ESG data architecture may look like
According to the Sustainable Finance Disclosure Regulation (SFDR), principle adverse impact (PAI) should be obtained “through all reasonable means available”, for instance from internal analysis, external market data, specific studies, public data or directly via issuer contact.
What is required is a process that seamlessly acquires, integrates and verifies ESG information. A solid yet flexible a data management function should facilitate the easy discoverability and explainability of information and effective integration into business user workflows.
ESG data management capabilities should facilitate the easy roll-up of information from instrument to portfolio and blend ESG with pricing and reference data sets, so it becomes an integral part of the end-to-end investment management process.
Data derivation capabilities and business rules can spot gaps and highlight outliers, whether it concerns historical patterns or outliers within a peer group, industry or portfolio. Additionally, historical data to run scenarios can help with adequate risk and performance assessment of ESG factors.
Delivering enhanced value from ESG data
ESG data comes in different categories and formats. To gather insight from it, it has to be aggregated. This requires capabilities to integrate ESG data with analytics to provision different stakeholders: from portfolio managers looking to decarbonise a portfolio to the finance function providing reports for the investor relations team.
Once a data management system has been implemented, benefits will include effective data onboarding and provisioning business users to securing data lineage and data cost and usage management. This increases the return on any existing and future data investments.
Individual desks will be able to access data, manipulate it, and pass it back to the central repository, where it will be mastered, consolidated and become a single version of truth. And if everyone within the company uses it, the scrutiny around the data and the quality will increase. Sharing IP across the organisation, and contributing to improving the data will, in turn, increase data ROI.
It is positive news also that we are now starting to see the development of comprehensive Environmental, Social and Governance (ESG) data management solutions targeted at the financial services industry. One such solution is being jointly offered by Cognizant and Alveo, following an agreement between the two companies.
As Craig Stanley, SVP and Business Unit Head for Cognizant Banking and Financial Services, states: “This agreement brings to market a unique and necessary solution for financial institutions to evaluate the societal impact of investment decisions and modernise their business practices to better align with their social responsibility goals. Alveo’s data mastering and data distribution solutions, which support financial institutions around the world, together with Cognizant’s digital implementation capabilities will help our clients meet new ESG regulations and the expectations of today’s socially conscious consumer.”
