On Tuesday 28th March, Icebreaker One held a live webinar to urge stakeholders to join the ESG Advisory Group (join here). With the aim of assessing the environmental data in ESG reporting, we convened stakeholders from across the ESG ecosystem in a bid to unpack the barriers and opportunities within the ‘E in ESG data’.
The real economy & the financial economy
In our research, an initial issue which surfaced was the link between the real economy and the financial economy when it comes to ESG reporting. A blurred line (or more accurately, a blurred loop) exists between data on energy and utilities, and how this feeds into the financial economy in a meaningful way that is aligned with net-zero. Equally, it’s unclear how to make financial flows consistent with the real economy and how to join the dots between financial incentives and ESG reporting. To begin to address these questions, we had to go deeper than the reporting, and focus on the data itself.
Drilling into the data
ESG data comes in formats that are not always machine readable and those that are, contain poor quality data, giving rise to potential greenwashing. Additionally, ESG dataset licences are not always clearly defined, with the datasets that are open, sparsely available because most are commercialised. In short, ESG data is not perfect, with limitations in the access, quality, transparency and trust of the data.
The trust issues in ESG data were echoed by a member of the webinar, who voiced the need for open data but felt there was a lack of trust or a hesitancy surrounding it. A common problem across the ESG ecosystem, they saw that organisations weren’t sure on the issues that could arise around competition or the changing of risk profiles. The drawbacks surrounding ESG data were also highlighted in our poll, in which we asked the audience: ‘How would you rate your confidence in the quality of environmental data in ESG reporting?
While the 39 percent who answered ‘low’ was unsurprising given our research, the 33 percent who voted ‘not sure’ led to the introduction of another question – what does quality environmental reporting actually look like?
One such regulatory body who has provided guidance on effective ESG disclosures is The Task Force on Climate-related Financial Disclosures (TCFD). TCFD outlines seven principles: relevance, specificity, completeness, consistency over time, comparability over time, reliability and timeliness.
Despite leaving the door open for subjectivity, these principles provide some direction on what good ESG reporting should look like. As TCFD disclosures move from voluntary to a more regulated model, we can begin to assess, firstly, if these criteria are being met and secondly, if the information provided is being put to use in a method consistent with net-zero targets.
ESG advisory group
The webinar provided a focused insight on the limitations of ESG data as well as helping us understand how improving environmental data in ESG reporting could be the momentum shift needed to incorporate net zero data into the financial economy.
Through our Open Net Zero work, Icebreaker One is making net-zero data more discoverable, accessible and usable and we aim to apply this model to ESG data. In order to achieve this, we’re running a number of Advisory Group sessions, inviting input from stakeholders across the ESG ecosystem. If you’re part of the ESG ecosystem, register your interest here to shape the future of Open Net Zero and ESG data.