ESG Book aims to ‘disrupt’ sustainability sector with free data

The ESG information sector has become a money spinner as asset managers increasingly rely on providers of such data to meet demand from sustainability focused investors. [iQoncept / Shutterstock]

HSBC, Deutsche Bank and Swiss Re have thrown their support behind ESG Book, a new environment, social and governance (ESG) data platform launched on Wednesday (1 December) to ‘disrupt’ the market with a free “public good” service for companies and investors.

Several firms provide ratings on a company’s ESG risks that asset managers use to make “green” investment decisions.

The ESG information sector has become a money spinner as asset managers increasingly rely on providers of such data to meet demand from sustainability focused investors.

But it is also coming under closer scrutiny from regulators and governments as trillions of dollars flow into the asset class.

Last year, the French and Dutch securities regulators called for European Union rules to prevent “greenwashing” or inaccurate claims that investments are sustainable and climate-friendly.

EU faces Franco-Dutch call for rules to stop 'greenwashing'

French and Dutch securities regulators called on Tuesday (15 December) for European Union rules to prevent “greenwashing” or inaccurate claims that investments are sustainable and climate-friendly.

Founders of ESG Book said limited accessibility is hampering the acceleration of capital flows towards sustainable companies, particularly in emerging markets.

The founders also include the World Bank’s International Finance Corporation, QUICK, Hong Kong Exchanges & Clearing, Glass Lewis, Bank Islam, Allianz X, Goldbeck and the Climate Bonds Initiative.

Companies can use ESG Book at no cost to disclose, manage and keep ownership of their ESG data in real-time. The data is then available to users for free, with a charge for analysis of the data, such as temperature scores.

The platform has been developed by asset manager Arabesque, and run according to principles from the UN Global Compact, which encourages companies to adopt sustainable policies.

“ESG Book makes sustainability data available and comparable for all stakeholders. It provides framework-neutral information promoting transparency,” said Sanda Ojiambo, CEO of the UN Global Compact.

ESG ‘Spotify’

Arabesque president Daniel Klier said the cloud-based ESG Book aims to be a disruptor in the same way streaming service Spotify has shaken up the music industry, to provide real-time ESG information in a common, consistent format.

“Through this platform, we aim to shape the future of ESG data,” said Klier, a former head of sustainable finance at HSBC.

The ESG data sector is led by companies like MSCI, Bloomberg, S&P, London Stock Exchange Group, Moody’s, Morningstar, ISS and Sustainalytics.

Largely unregulated, global watchdogs last month made their first recommendations to inject more transparency into how ESG data products and ratings are compiled to stop potential greenwashing or misleading claims about ESG credentials.

The International Sustainability Standards Board (ISSB) launched last month with G20 encouragement will introduce rules in the second half of 2022 to bring rigour and comparability to how companies disclose the impact of climate on their business.

“That’s the biggest gamechanger as it means filing of data that is standardised and of a quality level that can go into annual reports,” Klier said.

EU legislation

At EU level, legislators have started rolling out new laws that will make it harder for money managers or pension funds to make green claims.

New EU legislation called the Sustainable Finance Disclosure Regulation (SFDR), aims to help drive €1 trillion ($1.19 trillion) into green investments over the next decade and iron out the patchy climate-related information currently provided by financial market participants.

Set to roll out in several stages over the next two years, SFDR contains reporting obligations at both the company and product level.

“Any sustainability-related claim by a financial product must be well justified,” a European Commission spokesperson said. National financial market authorities will enforce potential penalties for non-compliance.

EU prepares to turn the screw on asset managers over greenwashing

For money managers and advisers keen to market their sustainable investing credentials to European clients, going green is about to get a lot tougher.

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