How ESG Technology De-Risks Investment Decisions and Drives Capital Investment
EXPERT OPINION ARTICLE BY:
Founder and CEO,
"It is now in the best interest of all publicly listed companies to offer the most accurate and complete public disclosure in order to be part of the assessment process."
The structural change that is underway in the investment management industry is being led with technological advancements such as machine learning and data science. In fact, it’s revolutionized the capital markets industry.
With this increased ability to aggregate and automate data by leveraging artificial intelligence, the investment management industry now relies on computerized systems to interpret trends, assess risks, forecast business strength, apply its investment criteria, and monitor a company’s operations. In fact, leading asset management companies are investing in technologies that promise to speed up and expand their data science capabilities.
As this trend becomes widespread and mainstream, it puts more pressure on public companies to disclose more of their performance data with increased frequency, so that capital providers are more capable of defining, analysing, and pricing capital risks.
We’ve also come to understand that environmental, social and governance (ESG) factors also have material financial implications, and therefore, these disclosures are becoming just as important and frequent as financial statements filings.
Investors continue to look for easily automated formats of key disclosure and audited information from public issuers. Being able to quickly find and analyze performance data, and seamlessly integrate that data into valuation models to make intelligent investment decisions remains a key focus for most money managers.
One such example of a technology initiative driving consistent and transparent information gathering, is the EU’s Corporate Sustainability Reporting Directive (CSRD) which now requires that more than 50,000 public issuers disclose their sustainability performance. However, not only are they required to disclose their ESG information, they must also digitally tag the reported information so it is machine readable and can thus be fed into the European single access point envisaged in the capital markets union action plan.
Algorithms have always acted as a wide-angle lens performing predictive modeling of climate related impacts, scrutinizing greenwashing tactics, measuring reports against the ever-growing list of global sustainability standards, and even identifying lesser-known companies worthy of being added to portfolios.
The investment advisor’s role continues to expand, not only for portfolio construction, but also in connecting investors with appropriate investment products that fit not only their requirements, but also their values; and are based on data filters and rankings. It is now in the best interest of all publicly listed companies to offer the most accurate and complete public disclosure in order to be part of the assessment process. But not only is being part of the assessment process critical, advanced technology - one can almost call it ‘Star-Wars-like’ technology - such as satellite imaging systems that can identify what is really occurring in a company’s own backyard, along with real-time data streaming, creates the background for finding gaps between the company’s corporate statements and the company’s reality. The alignment of the company’s stakeholder priorities in conjunction with its corporate strategy is only successful if all relevant ESG factors are disclosed and compared.
Along with the ease of data gathering and gap analysis, technology also assists with due diligence assessments. Conclusions, however, are only as accurate as the information disclosed, thus putting pressure on the reliability and accuracy of the data collected at the source. Ensuring internal technology and other “metered” systems are aligned with reporting requirements in an easily readable format not only optimizes the reporting cycle, but ensures key risk factors are proactively monitored so the company can manage the resultant outcomes. Centralising and organising the collected data also allows decision makers to better allocate resources, resulting in better management of capital costs.
In today’s digital world, automated solutions such as the Onyen ESG Reporting system bring not only operational efficiencies but also reduced costs. Created specifically for the customers’ reporting needs, Oyen centralizes ESG data and automates reporting for junior and mid-tier resource companies. Onyen Corporation recognized the need for an affordable and AI driven ESG reporting solution to overcome the complexities currently being experienced by many companies. The system aggregates disparate data sets; organizes the information and tracks changes; generates ESG scorecards and sustainability reports for multiple stakeholders; offers tools for monitoring performance against targets; and equips Boards and executives with the tools they need to make informed decisions.
Technological advancements such as Onyen’s will continue to drive efficiencies throughout the supply chain for many products and services, resulting not only in mitigating business risks, but in driving capital investment. And this technology benefits society at large by facilitating progress towards the ultimate goal: a more sustainable future.