written by: Andrew Gazal, CEO & Founding Partner
As experts expect ESG assets to hit $53 trillion by 2025, the need for verified, accessible and auditable ESG data has never been more significant.
I had the honour of speaking alongside peers from the Monetary Authority of Singapore (MAS), Surbana Jurong Private Limited (SJ) and UOB, and below are the five trends I see shaping the ESG data landscape in 2022.
MAS portfolio commitments and mandatory disclosures will lead to a continued heightened focus on ESG adoption in Singapore
The industry will back the right technology: One that provides verified, accurate, and accessible data
ESG ratings will decrease in significance as investors create their own weighted criterion
Regulations will accelerate the hunt for trusted data disclosure platforms
Neither the climate nor ESG data will be waiting on regulations and standardisations
1. A continued heightened focus on ESG adoption in Singapore
ESG is not a buzzword and not a trend. It is increasingly clear that companies who focus on ESG reduce the company’s exposure to risk.
A new way forward in sustainable finance is being paved. Singapore is well-aware of that fact, with MAS committing $1.8billion to climate portfolio earlier this year and announcing mandatory disclosure on all listed firms in Singapore, including ESG fund products sold to retail investors in a bid to curb greenwashing. Foong Kooi Fei, Deputy Director of Fintech & Innovation at MAS, took the opportunity to share the newly-launched Project Greenprint, which aims to harness data and technology to facilitate adoption. All these point to a two-prong initiative: the need to partner with companies who are starting their ESG investment journey and regulating those already in it.
Webinar poll report
75% of attendees indicated that they are either incorporating or actively including ESG data in their work
2. The industry will back the right technology: One that provides verified, accurate, and accessible data
A common thread agreed by the panel was the need for platforms to provide verified, accurate and accessible data.
Taking the case of the construction industry, for example, Eugene Seah, Managing Director of Smart City solutions and Senior Director (Special Projects) at Surbana Jurong Private Limited and Jasper Wong, Head of Construction & Infrastructure of the UOB Sector Solutions Group spoke about the challenges for corporates to realise the positive impact of material disclosure. Carbon footprint, material life cycle, and safety protocols are known metrics and part of risk assessments for companies. What is still difficult for corporates who track and possibly disclose this information, is the potential positive impact it may have on asset and company valuations.
Business owners need to have a way to benchmark operational metrics against their industry peers, whether to track their own journey, to allay fears, or to use as a report to access better finance terms.
3. ESG ratings will decrease in significance as investors create their own weighted criterion
A contentious subject matter but one that the panel agreed on too: ESG ratings are not and cannot be treated the same as financial ratings, given the breadth of sustainability topics.
Financial statements have a long history of standardisation across the balance sheet, and the ratings between each credit agency will often match up when compared. ESG ratings are not as consistent, as various investment houses focus on different metrics. For example, when assessing the construction industry, an asset manager may be interested to invest in green commercial buildings, while another is focused on social housing, but also requires the building to be green. The underlying ask is the same but they have a very different investment mandate.
4. Regulations will accelerate the hunt for trusted data disclosure platforms
The take-up of private disclosure reporting is expected to increase substantially due to regulations placed on the financiers, who in turn, are likely to place pressure on their disclosing entities.
Rather than working off assumptions and modelling, which do not accurately capture risk or other delayed actions, financiers will need to look for trusted data platforms where disclosing entities can measure and track ESG data, and financiers can aggregate the financial instruments provided. This ability to acquire, verify and audit the data will be critical in adhering to the aforementioned MAS mandate.
5. Neither the climate nor ESG data will be waiting on regulations and standardisations
As the panel concluded, there was an agreement in the (virtual Zoom) room on the need to move ahead and not wait on Taxonomies or the harmonisation of Standards. With the synergy of the MAS Greenprint, verification bodies like Surbana Jurong, and financiers like UOB looking at disclosure reports, a feature ESGTech can provide, the industry is poised to go full steam ahead in 2022.
The climate and our communities cannot afford to wait on the world after all – we need better data for a better tomorrow.
The ESGTech team is always interested to hear and support both corporates and financial institutions navigate their ESG strategy. If you want to find out more about our solutions or share your thoughts on this issue – drop me a DM or contact the team at https://www.esgtech.co/contact