Refinitiv launches the Future of Sustainable Data Alliance
Data company Refinitiv is partnering with a host of other organisations to launch the Future of Sustainable Data Alliance, which aims to identify, consolidate and standardise ESG information and mobilise capital into sustainable finance by removing one of the biggest blocks to its development: the lack of standardised data.
Refinitiv, which owns IFR, is partnering with the World Economic Forum, the United Nations, the Global Financial Markets Association and the Institute of International Finance, among others, to give investors and governments crucial information that they need to satisfy regulators and customers and fight climate change.
Inadequate data is one of the biggest hurdles for sustainable finance. Streamlining and harmonising data sets will help financial institutions and markets make investment decisions that align with 2030 climate targets, Refinitiv said.
“Access to data is central in the transformation to a low-carbon, sustainable economy,” said Matthew Blake, head of financial and monetary system initiatives at the WEF.
It is also essential to scale up funding for the UN's Sustainable Development Goals. The need to channel capital towards SDGs is "urgent" and the financing requirement is "immense", according to Refinitiv CEO David Craig.
“Today, many asset managers state that they don’t have enough data to help finance major transitions such as changes in demographics, climate change or addressing the shifts in global markets. It is therefore critical to define and make ESG more of a science than an art,” Craig said.
Investors lack information to quantify, measure and compare ESG impact, while companies also struggle to track, manage and report information they are increasingly required to disclose.
“The lack of actionable data and standards results in capital markets that are unable to fully understand and integrate sustainability considerations, and as a result allocate capital to inefficient and sometimes environmentally or socially damaging activities, projects and assets,” Refinitiv said.
FUTURE NEEDS
The alliance will assess investors’ current and future data needs. The recently completed EU taxonomy, which sets standards and labels for ESG issuance, has created new data requirements, and work is also underway to identify and map data sets that are crucial to achieving SDGs.
Investors also need non-financial data, including geospatial information, demographics, shipping, weather forecasting and natural disasters, as well as policy data required by regulators for mandatory disclosure and stress-testing portfolios.
Voluntary disclosure has led to differences in the volume and quality of ESG data and each of its sub-categories. Newer topics, such as biodiversity, have fewer data sets than carbon or emissions, for example.
The alliance will also be looking at technology to make the most efficient use of data, and produce better data analytics via artificial intelligence and machine learning.
“This is about trying to understand what the needs of the future are. If 90% of the world’s data has been created in the last two years, we don’t know what we will need in two, five or 10 years’ time and we’re asking investors for a wish-list,” Sherry Madera, Refinitiv’s chief industry and government affairs officer, said at the annual World Economic Forum in Davos.
Refinitiv has been providing the financial industry with ESG data for more than 15 years. It rates more than 7,000 companies with 450 ESG points from publicly reported data, which covers nearly 70% of global market capitalisation.
The alliance is expected to grow in coming months to include different groups with experience in areas covered by the SDGs.