Giving Compass' Take:
- Technology can help companies with transparency and accurate sustainability reporting to support accountability.
- How can you support the transparent reporting critical for ESG investing?
- Learn why the world needs both ESG and impact investing.
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The line between climate action and financial performance is blurring quickly. Corporations are increasingly relying on new technologies to navigate, filter and create data to better execute ESG obligations and ambitions.
Before AI, human analysts drove ESG reporting, which gave way to biases and reporting pitfalls, especially for analysts using spreadsheets and other relatively primitive tech tools. Robust analyses of a framework as dynamic as ESG demands a rigorous technological underpinning.
The shift toward tech arrives right on time. More shareholders than ever are viewing ESG metrics as a proxy for reduced risk and improved financial performance, and nearly every company, it seems, has set out on a path to provide more data to investors and other stakeholders.
All of this is becoming table stakes. A report by Natural Capital Partners found that 23 percent of companies have made a public commitment that by 2030 they will be carbon neutral or meet an internal emission-reduction target, and a G&A study found 90 percent of S&P 500 companies published sustainability reports in 2019. Earlier this year, the SEC stated that maximizing a company’s bottom line aligns with the pursuit of public interest. Both can be complimentary, although achieving this is no small task.
Companies that hesitate to fully disclose their stake in ESG goals are falling behind, according to Jared Westheim, VP in sustainable finance at Goldman Sachs.
"An increasingly important area for investors is that companies actually make disclosures that demonstrate there is a solid strategy in place for decarbonization, that their lobbying activity is aligned [with ESG goals]," Westheim said at the recent VERGE Net Zero conference. He spearheads Goldman Sachs’ climate commitments, the most prominent being the firm’s goal to deploy or advise upon $750 billion in capital related to sustainability.
"We wanted to think about our commitment as one that is oriented toward building the new economy we’re all facing, one that’s thematically oriented," Westheim said. Goldman Sachs’ new goals involve better guiding investors and asset owners toward decarbonization within the financial sector.
But when a company makes a commitment to investors and the public, it can be held accountable. That leaves room for liability if it can’t achieve what they’ve openly committed to, which can then lead to reticence in disclosures.
Or worse: failure to make the commitments in the first place.
A lack of transparent disclosures makes it difficult to determine just how sustainable a company really is. Data can help bridge the gap but when companies omit findings or opacity clouds their reports, aligning intent with action becomes difficult.
Read the full article about technology and ESG investing by Phil Rosen at Greenbiz .