Institutional Investors Launch ‘ESG Book’ to Standardize Sustainable Data

A group of major financial institutions, investors, and businesses, including HSBC, Deutsche Bank, and Swiss Re, have launched the “ESG Book,” developed by asset manager Arabesque, as a source for corporate sustainability information based on the 10 principles of the UN Global Compact.

The aim of the “ESG Book” is to make environmental, social, and governance (ESG) data more widely available and comparable through a digital platform, and it will follow five principles:

Companies Are Custodians of Their Own Data. Companies should control their sustainability data by having autonomy over the disclosure and maintenance of data in real time. This is intended to improve transparency and market-driven oversight from investors, banks, and business partners, as well as reduce common ESG data errors.
Data Usage Transparency Interactions Bring Better Reporting. Companies should be empowered to report on the most material and valuable issues requested by investors, which would allow data gaps to be identified more clearly.
Accessibility and Impartiality. ESG data should be reported by companies in a clear and consistent manner, and be readily accessible. ESG data platforms should also support equal access for everyone to promote greater transparency and provide more accurate, up-to-date information.
Framework-Neutral. ESG data should provide “a level-playing field” for all market participants and allow stakeholders to collect and report data based on sustainability questions from multiple frameworks simultaneously. It should also be adaptable and flexible to respond to a fast-moving market and regulatory environment.
Easing the Reporting Burden. Reported ESG data can be mapped across a range of frameworks. For example, if a company discloses carbon dioxideemissions according to standards from the Global Reporting Initiative, other reporting questionnaires can be populated with the same data.

The other companies backing the ESG book include the International Finance Corporation, the United Nations Conference on Trade and Development (UNCTAD), the Global Reporting Initiative, Bridgewater Associates, Hong Kong Exchanges and Clearing Limited (HKEX), Allianz, Glass Lewis, Cardano Development, QUICK, Bank Islam, Goldbeck, Werte Stiftung, the World Business Council for Sustainable Development (WBCSD), Climate Leadership Coalition, Climate Governance Initiative, Climate Policy Initiative, Climate Bonds Initiative, Responsible Jewellery Council, and GeSI.

The “ESG Book” “marks the evolution of corporate sustainability,” Georg Kell, chairman of Arabesque, said in a statement. “It enables more comparable and higher quality ESG data, thereby advancing the mission of making markets more sustainable.”

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Despite a large and growing number of institutional investors looking to increase environmental, social, and governance investing, a lack of disclosure, limited accessibility, and inconsistency of ESG data is holding back capital allocation toward sustainable business activities. A recent survey conducted by software and data firm Backstop Solutions Group found that many allocators are not tracking ESG metrics in their private portfolios, despite wanting to do so. And the main reason they cited for this was a lack of a universal standards for measuring and reporting on ESG data.

Last month, the Board of the International Organization of Securities Commissions (IOSCO) published recommendations about sustainability-related practices, policies, procedures, and disclosures in the asset management industry. The IOSCO said the market for ESG ratings and data has grown in recent years, in part due to a lack of consistent information disclosures at the entity level. IOSCO said regulators should pay greater attention to the use of ESG ratings and data products.

“Investors should be able to understand and trust the ESG ratings and data products they use,” Erik Thedéen, chair of the IOSCO’s Sustainable Finance Task Force, said in a statement.