ESG: Risks Vs Rewards: Enhancing Reporting for Sustainable Value Creation

Panellists:

Venetia Bell, Group Chief Sustainability Officer at Gulf International Bank (GIB) and Head of Strategy at GIB Asset Management

Joost Jan Noordegraaf, Partner at Mount Consulting

Moderator:

Charlie Quarterman, Head of Product at Suade

Last week, Suade organised a webinar on "ESG: Risks Vs Rewards: Enhancing Reporting for Sustainable Value Creation" featuring two speakers, Joost Jan Noordegraaf and Venetia Bell, who discussed various aspects of ESG reporting in the context of finance and sustainability.

Overall, the webinar underscored the complexities of ESG reporting, the importance of collaboration between finance and sustainability, and the need for clear governance and strategy in implementing effective ESG practices.

Here's a detailed summary organised by main themes:

Integration and Collaboration between Finance and Sustainability:

Joost Jan Noordegraaf highlighted the challenges in integrating ESG into financial reporting, emphasising the necessity for clear roles and ownership within organisations. He pointed out the difficulties arising when the ownership of ESG topics is divided, often leading to gaps in responsibility.

Venetia Bell shared her experience from the sustainability side, stressing the importance of understanding the distinct roles and responsibilities in collaboration with finance professionals. She underscored the complexity of the issues at hand, noting that both sustainability and finance professionals lack certain skills and experience, making collaboration essential for problem-solving. She also mentioned the different perspectives each department brings, often creating tension and difficulties in collaboration.

Venetia Bell advised on conducting a materiality assessment to identify key ESG topics and develop a clear strategy. She emphasised aligning management incentives with ESG goals and the importance of considering both positive and negative impacts.

ESG and Value Creation:

Venetia Bell elaborated on how ESG disclosure can drive value, citing a case study of an electric motor manufacturer. The company’s engagement in sustainability discussions led to the setting of ambitious greenhouse gas targets and the inclusion of these targets in management compensation plans, resulting in strong returns and market recognition.

Navigating Multiple Standards and Data Challenges:

Joost Jan Noordegraaf pointed up that current ESG reporting implementation projects are once again highlighting the deficiencies present in the existing front-to-back reporting value chain.

Joost Jan Noordegraaf spoke about the complexities of consistent ESG reporting in a multi-jurisdictional environment with varying standards. He pointed out the difficulties faced by multi-product asset managers who need to report similar metrics under different regulations, often leading to inconsistent data.

Joost Jan Noordegraaf emphasised the importance of establishing a robust data architecture that integrates both financial and ESG reporting requirements. He noted the high failure rate of such projects in banks due to legacy systems.

Venetia Bell highlighted the challenges with data aggregation in ESG ratings. She cautioned against the oversimplification inherent in aggregating diverse indicators, emphasising the importance of distinguishing between backward and forward-looking data for investors.

Greenwashing and Reputational Risk:

Venetia Bell addressed the issue of greenwashing, where companies may overstate their ESG achievements, posing a reputational risk. She debated whether ambitious but unmet targets constitute greenwashing.

Information Overload and Learning Resources:

Both speakers acknowledged the challenge of information overload in the ESG Bell recommended utilising the wealth of free online resources and industry associations for education and certification in sustainable finance.

Regulatory Landscape:

Joost Jan Noordegraaf predicted the incorporation of climate risk into capital requirements.

Venetia Bell acknowledged the inevitable differences in ESG regulation across jurisdictions. She emphasised the fundamental importance of creating positive impacts for businesses, people, and the planet, while also complying with regulatory standards.

Quotes:

"Collaboration between sustainability and finance is vital because neither side has all the skills or experience needed. We each hold a piece of the jigsaw puzzle, and it's only by coming together that we can solve the larger problem" - Venetia Bell

"We often see a shared ownership of ESG topics between the chief sustainability officer and the chief financial officer, leading to certain things falling between the cracks. It's crucial to define a proper governance framework at the start, focusing on how ESG can be a unique selling point and how to meet reporting and disclosure requirements effectively." - Joost Jan Noordegraaf

"Greenwashing poses a significant reputational risk. It's a delicate balance between setting ambitious sustainability targets and the risk of overstating achievements, which might lead to accusations of greenwashing." - Venetia Bell

If you are currently working on improving your regulatory reporting processes or would like to learn more about how Suade is automating regulation for global financial institutions, then please get in touch to arrange a demo.