Posted: 29 Aug. 2022 5 min. read

What are the key challenges of managing ESG data across the Financial Services industry?

FSIs are facing three fundamental issues when it comes to ESG data risk management:

 

First, data systems may not be equipped to handle the expanding scope of ESG data collection. This creates added complexity for FSIs that are already struggling with collating the data necessary for regulatory, management and financial reporting. Addressing the challenges of fragmented data sources, siloed processes and systems for data collection and reporting will be vital to deliver complete and accurate ESG disclosures and reporting. In addition, data used to support ESG related decisions being inherently non-financial may have historically been subject to weaker controls making them more vulnerable.

 

Second, existing data management capabilities of FSIs may not be sufficient to measure, value the impact of, and take strategic action on ESG metrics and concerns around environmental and social risks. For instance, applying data analytics to inform decision making on products that aid in financing climate outcomes. Having sufficient quality and the necessary data available is required to measure, track, and generate valuable ESG insights for internal and external stakeholders.

 

Third, existing data sets in FSIs are yet to be sufficient to understand, identify or measure the ESG risks in portfolios. Externally available proprietary licensed data sets can often be incomplete, lack robustness and the required specificity. Emerging technologies providing new levels of data (e.g. daily satellite imagery) are vast and often unstructured datasets which contain pertinent information, but extracting it is complex and fundamentally different to traditional financial data.

 

Are you interested to know more about ESG data risks? Watch this space for our next blog on "What are the risks IF FSI's don't get their ESG data right"

More about the authors

Vicky Poon

Vicky Poon

Partner, Risk Advisory

Vicky is a Partner in Deloitte’s Risk Advisory team, with over 18 years of consulting experience in data management and analytics working with clients to improve the way they capture, manage and leverage their data assets to anticipate risk and maximise business opportunities. Vicky specialises in engaging with senior and C-level stakeholders to develop pragmatic, tailored and achievable data and analytics strategies, operating models and architectures that provide a blueprint and compelling case for change. She is easily able to transition from strategy and business case phases into delivery execution and has been responsible for successfully delivering large complex projects across both business and technology domains. She has implemented enterprise data and analytics strategies for large scale transformations and regulatory initiatives including establishing the capabilities and architectures required for leading data governance, data quality, analytics and business intelligence practices, along with value generating business use cases than span regulatory and compliance, customer experience, revenue assurance and asset maintenance.

Wibishana Rockwood

Wibishana Rockwood

Partner, Climate & Sustainability

Wibi is a partner within the Climate & Sustainability services practice in Risk Advisory with over 17 years experience. Wibi is passionate about helping organisations develop a sustainability leadership position through data, reporting and assurance enabled by technology solutions. Wibi is a Chartered accountant and an expert in navigating best practice sustainability reporting standards and frameworks highlighting the connection between sustainability performance, financial outcomes and enterprise value. Wibi empowers an organisation to communicate sustainability related market claims and facilitates the creation of go-to-market strategies.

Ed Bosworth

Ed Bosworth

Principal, Risk Advisory

Ed has 25 years of global experience in transforming risk and finance functions for regulatory change; compliance and control; process and cost efficiency; impactful reporting and disclosure; data and model architecture; and scenario planning and stress testing. He was a senior leader of Australia’s Basel II community for many years, addressing all aspects of regulatory change. Ed also worked in the UK and Ireland from 2015 to 2021 where, among other roles, he led the climate modelling team at a leading UK bank

More about the authors

Paul Dobson

Paul Dobson

Partner, Climate & Sustainability

Paul is a partner within the Climate & Sustainability services practice in Risk Advisory. Paul has over 20 years’ experience working with clients across diverse sectors in Australia and the United Kingdom. Paul lead’s Deloitte’s Climate Risk offerings supporting clients to understand the impacts, risks and opportunities arising from climate change. This includes consideration of physical and transition impacts of climate change and the strategic and financial implications in the long term. Paul also has extensive experience in the provision of a wide range of sustainability services to clients including reporting, sustainability strategy, ESG, sustainability reporting and assurance.