ESG Symposium Abridged Minutes

 

Speakers: Corinne Neale, Global Head of Applications for Data and Analytics Solutions, BNY Mellon, Pierre Pourquery, Partner, Head of UK Capital Markets, EY and Rob Scott, Managing Director, Global Head of Market Infrastructure and Participants, Commerzbank

Moderator: Maurice Evlyn-Bufton, CEO of Armstrong Wolfe

One of the 6 pillars of COO focus in 2022 as determined as an output of the Q4 2021 COO Survey undertaken by the International COO Community (iCOOC), was not surprisingly, sustainability. This focus is enshrined in ESG.

As the first of a series of debates to be presented by iCOOC on ESG in 2022, Armstrong Wolfe was delighted to bring to the stage 3 leading executives capturing the views of banking and market initiatives (Rob Scott, Commerzbank), technology and strategy (Corinne Neale, BNY Mellon) and advisory expertise and insights (Pierre Pourquery, EY).

Corinne opened the debate with a detailed and enlightening overview of the sustainability and climate landscape. Specifically noting the unexpectedly positive experience she had in attending COP 26 and how things had changed significantly since the climate conference.

In answering: Why is COP26 so important? What was COP26 and Why was it necessary? Corinne laid the foundations for a lively debate.

COP26 was the moment countries revisited climate pledges made under the 2015 Paris Agreement. Relevant to the debate and the community iCOOC serves, over 450 of the world’s banks committed to a new initiative at the COP26 UN Climate Change Conference, which is designed to decarbonise their investments.

“The finance pledge, known as the Glasgow Financial Alliance for Net Zero (GFANZ), would mean that by 2050 all of the assets under management by the institutions involved will be aligned with net zero emissions. Economists have estimated that about $100tn in investment is likely to be needed in the next three decades to meet the net zero goal, so in theory GFANZ will provide more than enough cash to meet the goal.”

 

Mark Carney, former governor of the Bank of England, now a UK and UN climate envoy, said, “The architecture of the global financial system has been transformed to deliver net zero. We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account … [This] rapid, and large-scale, increase in capital commitment to net zero, through GFANZ, makes the transition to a 1.5C world possible.” (The Guardian, November 2021)

What is ESG for banking? Banks need comprehensive and credible environmental, social, and governance (ESG) strategies to participate in and benefit from the accelerating growth of sustainable finance. As institutional investors increasingly define custom environmental, social and governance (ESG) goals, there’s a greater demand for sufficiently accurate data to measure themes and impact. Although there are many data methodologies and metrics, there is still no universally accepted source for investors to use. In fact, a recent BNY Mellon analysis shows that the data needed to ESG themes and impact are not universally considered to be fit for purpose.

Why is ESG important to banks? This is why having access to timely, consistent ESG risk data not only can better inform a bank’s risk management processes across its business divisions, but also help ensure compliance with internal policies, external commitments, and international standards.

What are ESG risks? ESG risks cover issues ranging from a company’s response to climate change, to the promotion of ethical labour practices, to the way a company grapples with questions around privacy and data management.

ESG Factors

Environmental – Conservation of the natural world, addressing climate change and reduction in carbon emissions.
Social – Consideration of people & relationships, customer satisfaction, data protection and privacy.
Governance – Standards for running a company, board composition, audit committee structure.

The Role of the COO in Meeting the Operational Challenges of ESG – Data

It was agreed that the need for a data management process that ensures accurate, timely, consistent, transparent and accessible ESG data is a (if not ‘the’) significant challenge for the COO and all stakeholders in the ESG ecosystem.

What is the ESG data management requirement? To get reliable, high quality Environmental, Social, and Governance data to evaluate the sustainable credentials of any asset.

Summary

By driving companies to see sustainability as a business imperative rather than “just” a moral one, bankers and asset managers play a crucial role in improving the quality of nonfinancial disclosures. This will in turn make ESG investing a less complex and more sustainable business for all. On a practical level, the COO needs to:

1 – Enhance their screening strategies and leverage on scalable technology to integrate ESG in material processes.
2 – Understand data from ESG data providers and position the organisation better for the future with ESG data.
3 – Enhance their screening strategies and leverage on scalable technology to integrate ESG in material processes.

iCOOC Next Steps

To support the COO community in this endeavour, iCOOC will set and run a series of debates throughout 2022.

The aim is to enable the COO to meet the ESG demands and, by working as a peer group, help maximise the impact of ESG in combating climate change, addressing inequalities and in helping to ensure the robust, professional, and purposeful running and governance of an industry which is at the heart of global commerce.

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