CXOToday has engaged in an exclusive interview with Ramnath Iyer, Co-founder and CEO of ESGDS
- How ESG is becoming the essential ingredient for a successful business
The primary objective of every business is to enhance shareholder value, which requires minimizing/mitigating risk and monetizing the right opportunities. Today ESG issues pose the biggest risk and also provide the most lucrative opportunities. For example, wild fires, draughts, hurricane, etc. can destroy an entire season of farm produce in the blink of an eye. While on the other hand fertilizers that don’t damage the soil, crops that are resilient to pests, etc. can provide higher profits.
Hence all businesses are now identifying relevant ESG risks and opportunities and creating a plan to address both. The performance on this ESG plan is measured by assessment agencies and investors are using ESG assessments to construct their portfolios. As more investors integrate ESG factors in picking scrips, companies that are not addressing ESG risks and opportunities effectively are being excluded from portfolios, eroding their market cap and in turn negatively impacting their existing investors.
Businesses focusing on ESG also draw top talent, achieve cost savings, and can access new markets. Governments have taken note of the impending climate risks, as a result regulators world over are mandating additional disclosures, independent assurance of disclosures and requesting investors to stress test their portfolios for ESG risks.
- Why is ESG important for companies?
ESG is essential for long-term success in a changing business landscape. For example, as Europe is embracing sustainability companies that manufacture products with a high carbon footprint over its life cycle or products that are difficult to repair will start losing market access. We have recently seen Apple adopt USB C standard, publish repair manuals, and make parts available to comply with recent European regulations. On a similar note, companies in these markets will stop engaging with vendors who don’t espouse equal opportunity, reward their employees fairly and treat the environment with care. Hence retaining access to markets requires adopting ESG standards that are widely accepted in the client markets.
- How do companies allocate capital for innovation in environmental and social areas? How does this align with ESG goals?
The relationship between ESG transition costs and long-term returns is complex and often not always projected accurately by using traditional measurement approaches. While there may be short-term expenses associated with ESG initiatives, they are often seen as essential investments to remain competitive, manage risks, and position the company for long-term financial success.
Companies now use carbon accounting as an added variable in their RoI measurement. They are also using opportunity cost to measure investments that cannot be adequately justified using traditional measurement approaches. This innovative approach to measuring investments helps companies invest in areas such as renewable energy, carbon reduction technology, and sustainable social practices. Also, green financing at subsidized rates helps in allocating capital to projects that mitigate climate risks, improve environmental sustainability, and align with OECD guidelines.
- How ESGDS helping in bridging the gap between ESG data availability and the diverse needs of different industries and investors?
ESGDS is the only solution provider helping the BFSI sector including asset owners, asset managers and Banks, rating agencies and leading global NGOs develop and implement in-house solutions for their ESG assessment requirements. We track over 17000 companies globally and our solution capabilities range from curating ESG data for public and private companies, development assessment models for Equity and fixed income issues, to portfolio analytics for asset owners and managers. We also help banks with their portfolio level carbon estimates, analytics, and integration with climate scenario/stress testing and disclosures.
ESG disclosures are tracked by us real-time and saved in our data repository. ESGDS uses a combination of ML/NLP models and domain experts to curate data. Every data point is collected in its in-house data platform with eight-steps of validations. The platform’s workflow ensures there is a maker-checker prior to data being shared with the client or used for assessment.
- How does ESGDS solution provide transparency and disclosure regarding ESG factors in investment options?
ESGDS’s data and assessment platforms provides customisation to support diverse use cases in the banking and financial sector. Our platform takes a glass-box approach, providing institutional investors with granular data along with its provenance, customisable data dictionaries, flexibility to adjust materiality from the UI, thereby enabling institutional investors to automate their entire ESG research. With a large team of over 200 domain and technology experts, ESGDS helps its clients stay on top of the evolving regulatory changes and scale up their coverage.
