If funds and companies default to manually trying to meet their ESG reporting obligations without using technology support, they are embarking on a hugely laborious, lengthy and costly task.
The Spreadsheet Manual Approach
Firstly, funds and companies may need to create manually questionnaires in order to collate data and responses. In the case of companies, they may be required to obtain responses from multiple internal departments which may be siloed and in the case of funds they may be required to collate responses from the underlying investee. As the 1st line of defence needs to evidence that it is standing over the data, this may be the approach even if the data is provided by a third party data vendor. Clearly there is a dependency for both funds and companies in obtaining the responses promptly.
Once all the ESG data and responses is gathered, it is then manually entered into spreadsheet to organise and analyse the information which will inherently be less than robust as it is likely to be error strewn. This manual approach has significant auditing deficiencies and there is an absence of methodical tracking.
The Support Technology Can Underpin ESG Technology
A key purpose of ESG reporting is that the ESG performance of a fund or company can easily be compared and evaluated. As such ESG reporting needs to be a repeatable process on a periodic basis that will ultimately be commoditised. A critical question is how can this be achieved? Incorporating technology into your ESG reporting solution is a fundamental objective, alongside those such as common standards and the availability of data.
The appropriate technology incorporated into your ESG reporting solution should eliminate resistance from ESG data gathering, in addition to curating and facilitating comparison for investors. Ideally, your ESG Reporting technology support should be built on a cloud -based platform which will encourage robust analysis of the data.
Your solution should allow access to a central repository for data storage and ensures consistency of responses and alignment with marketing materials, investor prospectuses, policies, accounts and board reports. There may be an option to integrate your ESG reporting solution into the broader enterprise or fund environment depending on the platform you have selected.
The incorporation of technology into your ESG Reporting solution lends itself to the simplification, standardization of the reporting process, open communication and the real time exchange of information which can be recorded and time stamped.
Excusing the pun, the manual approach is not ‘sustainable’. There are many advantages of incorporating technology into your ESG Reporting solution not least that you will have reduced reliance on external ESG expertise and can plan accordingly particularly in relation to existing competencies. A technology based ESG reporting solution helps demonstrate that ESG is being embedded into the culture of the fund or company whereas a manual approach suggests this a one-off ring fenced project lead solution which be definition is almost stand alone to the company or fund. Also, a technology ESG reporting process lends itself to standardization and continual refinement. Finally as the EU taxonomy expands from just being climate focused to considering the Social and Governance Pillars, those relying on a manual solution will be exposed to an increasingly arduous ESG reporting process!
Muiris O’Dwyer is a Co-founder TopRiver Partners
TopRiver Partners is in a strategic partnership with Gecko Governance