Given the lack of standardization, how should FIs think about ESG reporting?
- Creating a well-defined global framework for ESG and sustainability factors will bring more accountability in the financial sector, but this task is very complex in nature.
- Financial institutions are increasingly feeling the pressure from an ESG standpoint, given the SEC crackdown and demands from consumers, but the lack of standards makes it hard for them to formulate a strategy.
Currently unregulated and unstandardized globally, ESG is becoming an increasingly confusing arena. And as the financial industry gets more involved in this field, questions and issues are mounting.
“When I talked five years ago to clients, ESG was hardly a topic. Now, almost everyone wants to issue a sustainability bond,” said Hans Biemans, managing director and head of green and social bonds at INGduring a panel at Money 20/20 Europe.
There is no doubt that creating a well-defined global framework for ESG and sustainability factors will bring more accountability in the financial sector. Right now, each company sets its own standards, and even the same company can get different results to the same issue given the vast amount of methodologies currently available.
Angel Agudo, VP of product at Clarity AI, a platform that helps companies assess and report climate risks, believes there are two main parts of the overarching problem – one about quality and the other about quantity.
Regarding quality, the lack of ESG reporting standards leads to a lot of differences when trying to compare companies. The quantity aspect relates to the fact that, given the lack of standardization, companies are free to report the information they feel is most important.
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