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De-risking sustainable reporting of commercial banking data

De-risking sustainable reporting of commercial banking data

While the Sustainable Development Goals (SDGs) set by the United Nations General Assembly for 2030 are ambitious, the financial services industry will play a crucial role in supporting countries with implementing new approaches to build momentum and accelerate progress.

Alongside this, technology that is disrupting traditional economic markets needs to be harnessed, especially in the fintech space, in order to allow big data to support policy decisions that are linked to the UN’s SDGs and in turn, promote inclusion, efficiency and innovation.

Reporting the good in technology

In Sustainable Development Goals: Harnessing Business to Achieve the SDGs through Finance, Technology and Law Reform, World Bank Group Senior Vice President for the 2030 Development Agenda Mahmoud Moheildin highlights that “leveraging technology for the public good requires global cooperation and partnerships to amplify its benefits, and to identity the risks and mitigate them.

“Ten years after the financial crisis, we have learned that preventing and dealing with risk early on is less costly in financial and human terms than tackling these issues too late.”

With this increased risk comes a revision of the design of the report and the reporting process and as stated in Deloitte’s ‘Navigating the Evolving Sustainability Disclosure Landscape’, reporting is a significant challenge because there is a lack of standard practice in this area. It is nearly impossible to compare and measure companies’ sustainability performance against their competitors.

Despite 92% of the world’s 250 largest organisations currently reporting on sustainability according to the Business and Sustainable Development Commission, companies are struggling with interpreting the multiple standards and initiatives on the horizon.

“If done right, sustainability reporting can serve to assist companies not only in meeting external stakeholder expectations but also, and in some cases more importantly, in helping to drive an increase in business value,” the Deloitte report reads.

Source: Deloitte

Framing ESG risk with regulation

In conversation with Finextra, Leonie Schreve, ING’s global head of sustainable finance, explains that “additional clarity from regulators and supervisors will be key to inform how ESG risk will be integrated into the prudential framework and should also be integrated into institutions’ risk management.

“This clarification will avoid duplication of efforts as well as avoid adoption of very different approaches by different institutions.” She adds that ING advocates for the need to “ensure data quality and harmonised ESG reporting standards – in line with existing and new standards being developed by the EU.

“It is important to facilitate the building of long-term ESG disclosures, supporting easier access to relevant data, for example through a centralised database at EU level. Scrutiny on the quality of ESG ratings and data will be a fundamental step.”

Managing data cohesively

Stuart Weir, management consultant at Capco, tells Finextra that there is an increasing demand on banks to demonstrate a more cohesive view on data management, while at the same time making improvements to technical capabilities in the marketplace.

“Whether it be leveraging virtualisation solutions to align existing data complexities that are beyond their immediate financial or organisation capacity to resolve, or reorienting towards an event-driven architecture, the options exist to support a significant reduction in data movement and duplicative activity, and in turn benefit sustainability reporting.”

Weir goes on to compare virtualisation, which offers an immediate resolution to merging “seemingly disconnected technical components of the enterprise to create a virtual layer of data to serve reporting outcomes” and a “the adoption of a centralised architecture,” which would allow for a “business outcome focused set of events to be provided with ‘just enough’ data to inform on the required outcome.

“This significantly reduces the movement of data and allowing for computation of related data to be conducted and shared with aligned business processes.”

Converging pressure, regulation and scrutiny

However, a recent report by the World Business Council For Sustainable Development (WBCSD) called ‘Reporting matters’ stated that the “convergence of public pressure, government regulation and investor scrutiny has led to an explosion of information requests and reporting approaches to satisfy stakeholder needs.

“While this has made sustainability reporting an imperative for business, it has created a significant burden for reporters.” Despite this, the report went on to read: “Corporate reporting is the language that will bridge the trust gap between business and society and allow the market to allocate capital where solutions have the most material impact.”

However, sustainable finance is more than just transparent data and consistent standards. Data is merely the start of the journey because it can encourage the transformation in behaviour and attitude that needs to occur to resolve the climate and environment crisis.

Finextra Research and ResponsibleRisk will be focusing on sustainable finance in commercial banking at the first SustainableFinance.Live Co-Creation Workshop on Wednesday 4th December at 6 Alie Street in London.

Register your interest here for our inaugural event, where you can discuss what is driving the demand for sustainability and why companies are struggling to meet the benchmark set by the UN General Assembly’s Sustainable Development Goals (SDGs).

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