Why ESG Is Necessary, Not A Nice To Have
As of July 2020, 90% of companies in the S&P 500 have published their annual corporate sustainability/ESG reports. Environmental, Social and Governance (ESG) analysis and reporting can provide valuable insights, and help create long-term value for stakeholders. With an emerging market of younger generation investors keen to associate with brands and organisations that positively affect society and the environment, ESG is now a critical attractor for financial services firms.
It’s also increasingly becoming a legal requirement. For instance, the European Union SFDR (Sustainable Finance Disclosure Regulation) came into effect on March 11, 2021. This framework imposes mandatory ESG disclosure obligations on asset managers and other financial market participants.
There is still a considerable knowledge gap between ESG information and data supply. Factors such as the high cost of collecting and reporting data, and deeply varying ESG reporting standards and frameworks are contributing to this deficit. However, some financial brands are taking the lead in promoting transparency, and leveraging technology to facilitate ESG analysis.
How Nationwide Embeds Transparency Into Its Reporting To Consumers
The Nationwide Building Society is using data-led digital transformation to drive greater transparency in its reporting -- especially to its consumers. This approach is also assisting the organisation in its bid to explore new ways of serving its customers and supporting long-term business growth.
Rather than focusing on big data, Nationwide is first looking at the business problems that the organisation and its customers are currently facing. This provides the basis for the subsequent analytics and problem-solving measures. Nationwide can then communicate these insights to the relevant customer or stakeholder via its app. According to CIO Gary Delooze, Nationwide’s digital platform gives recommendations in actionable and simple language. So for example, a customer might be advised that, “If you actually want to hit your savings target for the holiday that you want next year, then perhaps you could do better if you didn’t spend it on these things.”
Nationwide uses Apache Kafka data technology for event capturing, and MongoDB to hold the data from the event stores. A number of other technologies tackle processing, analysis, and the delivery of results through Nationwide’s app and internet banking site.
For Nationwide, app building is a collaborative process that draws on input from the organisation’s consumers. This involves talking to members about their experiences of working with Nationwide, and other organisations. The goal is to create a full picture of all the events that ultimately come through Nationwide. Drawing on insights from this, members can see exactly how they are interacting with the building society, through what channel, when, how, and at what time. In terms of Nationwide’s own internal operations, this approach is also providing a full 360-degree view of its members.
In a drive to protect its consumers from fraud, the Nationwide Building Society is also reassessing its policies on cryptocurrency transactions. According to a Nasdaq report quoting the UK business news publication Financial News, Nationwide is monitoring cryptocurrency activity and placing extra safeguards on activities that could leave its clients vulnerable. Protection measures include blocking suspicious payments and offering “tailored scam warnings.”
How Schroders Is Fully Integrating ESG Into Its Financial Analysis
In line with a goal announced by the organisation in November 2019, Schroders’ investors are now integrating Environmental, Social and Corporate Governance factors into their decision-making across all investments that the firm manages.
For implementation, Schroders has developed a platform called impactIQ. The technology enables the organisation’s investors to understand the direct impact that their activities are having on society and the environment. The platform includes proprietary tools that provide clear and meaningful intelligence about the impact of investments. Among these tools is the award-winning SustainEx™.
Earlier this year, an independent panel of judges consisting of representatives from leading financial firms, academics, and experts selected Schroders’ SustainEx™ as the Most Innovative ESG Product at the ESG Investment Awards 2021.
The tool was honoured on the basis of its unique and granular quantification of ESG measures. It operates on the assumption that the positive and negative impacts companies have on society are not captured by conventional investment performance measurement. SustainEx™ uses a common monetary lens to view these impacts together with current profit levels. This allows the tool to align ESG analysis with investment risk.
The tool draws from over 700 academic studies, applied to 13,000 companies globally. The result of its analysis is an aggregate measurement of company risk and a dollar cost or benefit, which may be compared across companies, funds, and indices. This contrasts with existing approaches to investment analysis, which don’t account for sustainability and impact related risks and costs.
Want to hear more from Nationwide and Schroders on ESG?
Joining us at FIMA 2021 live and in person this November. We have;
Day One, 12.00pm - 12.30pm
CDO Interview – Which Skills and Tools do Data Teams in Financial Services Need Next to Perform and Thrive in the New Digital Business Environment?
Simone Steel, Group Chief Data Officer, Nationwide
Day One, 12.50pm - 13.10pm
Data Insights Panel – How Can You Generate Faster Insights at Scale from Your Enterprise Data as Global Markets Demand Action on Sustainability and ESG
Mark Ainsworth, Head of Data Insights, Schroders
