While sustainable investing has taken off these past few years, there remains one big barrier for investors who want to take the leap: the unavailability of data.
What’s wrong with the data? In part, data surrounding ESG (Environmental, Social and Governance factors) is treated as an additional, optional component, when it is fundamental and necessary. Yes, sustainability data has increased in volume. As a result, ESG investments are rising to the top amidst increases in regulations. But there remains much room for improvement.
Enter the most influential sustainability summit since before the COVID-19 pandemic: COP26, officially known as the 26th Conference of the Parties. Taking place 31 October to 12 November in Glasgow, COP26 will gather nations that signed the 1994 United Nations Framework Convention on Climate Change (UNFCCC).
Among the critical issues being addressed, COP26 has a focus area and discussion around mobilising the financial sector. Let’s look at how more available, reliable and accurate data will lead to more sustainable investments.
How does finance mobilisation fit into the big picture?
‘Climate finance’ relates to all local, national, and trans-national financial instruments (public and private) that act towards climate change mitigation and adaptation. COP26 recognises that fast, effective change is impossible without it. That means the financial sector must be mobilised to achieve our climate goals. It is clear the financial sector has a major role to play in mitigating and adapting to the impacts of climate change.
How data can impact sustainable investments
The maxim “what you can measure you can manage” holds special relevance to sustainable investing. Especially considering how the financial sector might support companies with sustainability built into their processes. Until recently, finance sector organisations couldn’t make informed decisions about their investments as the right data simply wasn’t available, and the data they had access to was inconsistent and lacked clarity.
Now, for investors looking for opportunities that align with their values, data is what will support them to make informed decisions. Yet, as many firms don’t disclose that data, investors and their funds are making decisions without the right information.
By contrast, we’ve seen that where disclosure and data exist, there tends to be insight that leads to record investment, as documented by the World Economic Forum. Supported by the fact that data is becoming more accessible and regulated. But it’s not enough. The wealth of data requires that we find a helpful way to view it all. That leads to meaningful comparisons and data unified by a specified framework.
We can also understand the process this way:
- Gather the data
- Conduct materiality assessments
- Determine how ESG factors come into play
- Perform due diligence about investments.
Again, all of this requires a framework and a way to make data sets comparable between companies, while lining up within regulatory mandates. That is a tall order to fill. It’s also where we come in.
How can Rio help?
With all eyes on Glasgow, we can count on one outcome: discussions of data’s impact on sustainable investing will gain momentum and set the stage for further action. Rio allows financial professionals to understand, assess, and disclose portfolio and fund level ESG data in line with frameworks and regulations.
We make it easy to align with values and conduct due diligence effectively. Rio also takes the guesswork out of comparing datasets so you can make sound financial investments. The more data we can effectively measure, the more improvements we can make—and the more investments can go to supporting the best practice sustainability efforts.
Putting it all together
Data is driving the revolution of sustainable investing. This trend can only be expected to accelerate over time, with a rapid pace of change. We’re keeping our eyes on the COP26 event to see how they envision the next steps of mobilising the financial sector. Rarely if ever have values, assets, investment, and the imperative for global action intersected with so much power and promise.
Be sure to download our guide to understanding your ESG scores. How else can Rio help you? Contact us at rio.ai or schedule a meeting/send us a message.
