Sustainability Jargon Buster II

Sustainability Jargon Buster II

Simone Koo Ishikawa

20 years: Investment Banking

In this video, Simone looks at some of the reporting initiatives coming up and spends some time discussing the work of data aggregators and ESG rating providers, before seeing how ESG consultancies can help make this all a reality.

In this video, Simone looks at some of the reporting initiatives coming up and spends some time discussing the work of data aggregators and ESG rating providers, before seeing how ESG consultancies can help make this all a reality.

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Sustainability Jargon Buster II

17 mins 8 secs

Overview

Sustainability leadership requires a holistic approach, encompassing a comprehensive understanding of ESG terminology, global initiatives, and taxonomies. Effective disclosure reporting, data aggregation, and ESG ratings are essential for evaluating and measuring progress towards sustainability goals. ESG consultancies offer valuable guidance and expertise in navigating the complex landscape of ESG issues, helping organisations develop effective strategies for sustainable growth. By engaging with these consultancies, companies can gain a deeper understanding of ESG considerations and incorporate sustainable practices into their operations.

Key learning objectives:

  • Understand how global ESG initiatives and taxonomies are essential for effectively leading a business

  • Understand how global disclosure reporting initiatives are essential for effectively leading a business

  • Understand how data aggregators and ESG ratings are essential for effectively leading a business

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Summary

What is the purpose of disclosure reporting initiatives in the field of ESG management?

Disclosure reporting initiatives serve the purpose of promoting transparency and accountability in ESG management. These initiatives require companies to disclose information about their ESG performance and report on their progress towards sustainability goals. The aim is to provide stakeholders, including investors and the public, with reliable and standardised data to assess companies' environmental and social impact, as well as their governance practices.

What are some key reporting initiatives in the field of sustainability and ESG?

Some key reporting initiatives in the field of sustainability and ESG include:

  • EU Non-Financial Reporting Directive (NFRD): Requires large EU companies to disclose non-financial information related to environmental impact, social and employee matters, human rights, and anti-corruption and bribery

  • Corporate Sustainability Reporting Directive (CSRD): An amendment to the NFRD, it increases reporting requirements for large companies, capturing a higher percentage of EU limited companies by turnover. Companies will have to apply the new rules for the first time in the financial year 2024

  • Sustainable Finance Disclosure Regulation (SFDR): Introduced in the EU in 2021, it demands transparency and disclosure for funds integrating ESG factors into investment decisions. Funds are classified into Article 6 (brown), Article 8 (light green), and Article 9 (dark green)

How do ESG data providers evaluate companies' ESG performance?

ESG data providers evaluate companies' ESG performance by collecting and analysing relevant data across environmental, social, and governance factors. They use standardised metrics and methodologies to assess various aspects of a company's sustainability practices. For example,

  • MSCI analyses 35 key ESG issues across 10 themes,
  • Sustainalytics measures the extent to which a company's economic value is at risk due to unmanaged ESG risks
  • Bloomberg ESG Data covers a wide range of sustainability topics organised into 2,000+ fields
  • Refinitiv cover over 85% of the financial industry by market cap across more than 630 different ESG metrics

These providers combine data from different sources, such as regulatory filings, company reports, and proprietary databases, to generate ESG ratings and scores.

What are some examples of ESG rating agencies, and what factors do they evaluate?

Some examples of ESG ratings agencies include Bloomberg, Refinitiv, MSCI, Sustainalytics, ISS ESG, and S&P Global. These agencies evaluate companies based on their environmental, social, and governance performance. They consider factors such as carbon emissions, water use, labour practices, diversity and inclusion, climate change strategies, supply chain management, and corporate governance. Each agency has its own proprietary methodology for assessing these factors and assigning ESG ratings or scores to companies. Users should be aware that ratings may vary between agencies due to differences in data collection methods and the weighting of various factors.

What are some examples of ESG consultancies and what services do they offer?

Some examples of ESG consultancies include TBLI, Nossa Data, IMAGINE, and KKS. These consultancies offer a range of services to help companies incorporate sustainability practices and improve their ESG performance. TBLI and Nossa Data specialise in data-driven insights and solutions, leveraging databases such as Crunchbase, Pitchbook, and Beauhurst to provide comprehensive information on ESG companies and trends. IMAGINE, co-founded by Paul Polman, works with companies to advance global goals for sustainable development, focusing on the UN's Sustainable Development Goals (SDGs). KKS, led by George Serafim, works with boards to address sustainability issues. Overall, ESG consultancies assist companies in mapping their challenges, identifying gaps in their ESG performance, and developing tailored solutions to drive sustainable business practices.

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Simone Koo Ishikawa

Simone Koo Ishikawa

Simone Koo Ishikawa is the founder of ishikoo.us - RSK Finance Ltd., a consultancy that advises and mentors fintech and impact companies. She has 16 years of experience in banking across trading, structuring, and ETF sales at GS, MS, CS, and JPM. She is a mentor at Accenture Fintech Innovation Lab and Unreasonable, and an angel investor in fintech and impact start-ups. She also tutors and lectures at MBA programmes at Oxford and Cambridge and is an Honorary Practice Fellow at Imperial College Business School.

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