Investors want the best ESG data. Here’s how to give it to them.

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By Webdesk


One of the The main criticism of ESG investing is that the movement is just talk, not action. The main reason for this is that there simply aren’t enough entrepreneurs offering enough ESG-aligned investment opportunities. In fact, a third of VCs struggle to identify suitable ESG investment opportunities, even though 97% of them consider it important in making investment decisions, due to the lack of adequate ESG disclosures and excessive costs of collection and analysis of ESG information.

At the same time, ESG-focused assets under management are expected to grow from $18.4 trillion to $33.9 trillion in the coming years. Whether these figures become reality is increasingly up to entrepreneurs who need to take it seriously to quickly deliver high-quality ESG data.

There simply aren’t enough entrepreneurs offering enough ESG-aligned investment opportunities.

Choose the right disclosure framework

Investors have less confidence in companies that do not collect investment-grade data (short for data that meets high standards of timeliness, accuracy, completeness, and auditability), and the majority of investors see poor-quality non-standardized data as their biggest barrier.

Regardless of your market and industry, the best way to get started delivering high-quality data to investors is to embrace pre-existing reporting and disclosure frameworks as early as possible. There are many frameworks to choose from, including Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), Task Force on Climate-related Financial Disclosures (TCFD), CDP (originally known as the Carbon Disclosure Project), and United Nations Global Compact (UNGC). While founders may need to carefully consider which framework to prioritize at first, most frameworks are complementary in nature and mature companies tend to rely on different frameworks in their reporting.

For example, the GRI framework examines a company’s impact on the wider economy, the environment and society to identify material concerns, while SASB is more focused on serving the interests of investors interested in ESG data that informs the financial performance of companies in their portfolio. Basically, GRI is an ‘inside-out’ framework that examines the company’s impact on the world, while SASB is an ‘outside-in’ framework that looks at the effects of the climate on the company and the risks it faces.

What ultimately works best for a given company at a given time depends on a number of unique factors, and effective prioritization is essential.

If you’re looking at an IPO, make sure alignment with TCFD is your number one priority

The Securities and Exchange Commission (SEC) last year proposed a set of rules regarding mandatory climate disclosures. Under the proposed rules, companies filing with the SEC must disclose a number of data points, including whether climate-related events are likely to push the needle on any of the accounts in the financial statements and what governance structures are in place to mitigate impacts against climate risks. The disclosures envisaged in the SEC’s proposal are broadly consistent with those of the TCFD and the Greenhouse Gas Protocol, and if you’re preparing for an IPO, you’d do well to ensure that your ESG data is prioritized are aligned with these frameworks. .



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