Delivering actionable insights and quality data
Environmental Finance: What regulatory developments are front of mind for investors this year?
Till Jung: Several different disclosure requirements are coming into force around the world and investors need to understand what to report on and what data they need.
Aside from the climate-focused regulations coming into force this year, such as the UK’s Financial Conduct Authority disclosure requirements. and New Zealand’s disclosure rule, biodiversity-related reporting requirements under the EU taxonomy will hit everyone this year. In addition, while it is a voluntary framework, the Taskforce on Nature-related Financial Disclosures has already seen over 100 financial institutions register as early adopters. Among them are many of our clients and we provide a variety of solutions in these evolving areas.
We also see social issues rising up the agenda. It is not a new topic but it’s certainly gaining traction – particularly around modern slavery, labour and human rights as recent regulatory requirements have enhanced corporate disclosures in Australia, the UK and Canada, for instance. Our new modern slavery solution allows clients to upload their portfolio and download a report which details their risk exposure and also demonstrates how their holdings are managing modern slavery risks.
With regulatory frameworks such as the Corporate Sustainability Due Diligence Directive in the EU coming into force, investors are also increasingly thinking about combined social and environmental risks as well.
The other topic is cyber security. The US Securities and Exchange Commission has enhanced its requirements for US-listed companies to disclose how boards are overseeing cyber security risks and we expect this topic to continue growing in importance. We provide a data-driven risk score that allows investors to understand the risk of a breach event happening in the next 12 months for their holdings.
EF: How do you help investors differentiate between data quality over quantity?
TJ: It is important to have a very strong global client service team. Investors need an expert partner with regional understanding to help them navigate the complexities throughout their investment journey. Some of our clients have teams in place to analyse the data that they are looking at, but some do not have those resources. We have subject matter experts who can help them interpret the data, apply research to their investments and provide the regional context. For global clients, we can provide the big-picture view as well.
Investors sometimes say there is not enough data out there. I think there’s probably more than enough, but you must find the data that’s decision-useful and is relevant to you. And you need efficient ways to consume it. We provide the flexibility to consume the data: via a classic feed, an API or via cloud delivery. We also deliver our offerings via many third-party platforms. It has become increasingly important for clients to be able to have this flexibility in how they access and integrate the data.
Regulations such as the EU’s Sustainable Finance Disclosure Regulation and EU Taxonomy requirements have also been further clarified over the last two or three years. You must adapt very quickly to make sure that your clients get the data in a form and shape that is compliant with the latest regulatory clarifications.
EF: What improvements in corporate disclosure and transparency would you like to see to enhance the quality of the data that investors need?
TJ: Cyber and biodiversity are more nascent areas where we believe investors need more data reported by companies to gain more actionable insights. There is also a lack of comprehensive information on the asset locations of companies, which is crucial to allowing investors to accurately and fully evaluate the physical climate risks, biodiversity impacts, or social risk exposures across their portfolios. While more progress needs to be made in terms of transparency, ISS STOXX can help clients by modelling the full value chain impacts of their investments.
EF: You’ve recently merged with STOXX. How do your clients benefit from your enhanced offering?
TJ: With a full index capability added to our offerings, we now provide a comprehensive, integrated set of solutions across the whole investment lifecycle. We have the data and research solutions to analyse and report on sustainability risks and impact, we are providing leading engagement services alongside industry leading shareholder meeting research and voting solutions to act based on that data, and now we provide best-in-class index solutions. Clients can now utilise the same sets of data or research across different aspects of what they’re trying to achieve.
For more information, see: www.issgovernance.com/esg/
