Building Market Platforms for ESG-Related Data Management and Reporting

“I want to create a real, tangible, measurable impact in the industry by providing complete, transparent and reliable information to key stakeholders so that they can accelerate their own transition, and the transition of their clients, towards a more sustainable economy”

A Greenomy employee

ESG Data Management & Reporting: a Collaborative Approach is Required

Today, more than ever, coordination of strategies between all actors in financial services is key to succeeding in transitioning towards a more sustainable economy, financing this transition, and avoiding sanctions for non-compliance with regulations.

The first step in which coordination is required is creating the baseline for how compliant all stakeholders (e.g., corporates, issuers, investment managers, banks) currently are with the reporting requirements emanating from the various ESG taxonomies that are being developed throughout the world.

Enabling collective action towards a more sustainable financial system requires a representative, trusted, and transparent data baseline of the current state of ESG compliance. This involves a huge data management exercise. Capturing data points from all stakeholders requires a data standard, a process standard, a connectivity infrastructure, and a community that is eager to work together.

Yet how do you mobilize thousands of corporates and financial institutions to share data with each other in an effective and efficient way? The key is to create a community of interest: a coalition of the willing, where everyone wins when working together.

One of the most efficient coordination mechanisms for the financial service community is to use a set of standardized market platforms and to create a governance model that induces strong network effects and encourages everyone to contribute data. Based on numerous conversations with many stakeholders, there is a common desire to address this data management issue with a collaboration mindset. Everyone realises the clock is ticking and the problem at hand requires much more than a silo-based approach. 

Three key building blocks

Seniors from financial institutions and corporates are looking for a market solution that supports their ESG data management strategies at three levels:

1. Interoperable standards

The global regulatory and standardisation landscape is quickly evolving. Stakeholders want to remain up to date with increasing sustainable finance regulatory requirements and ESG taxonomies. They want to be at the table with leading regulators, developers, and sponsors of taxonomies around the world. They want to take part in taxonomies standardisation and interoperability discussions with a view to speed-up adoption and limit operational costs.

2. A common platform

Everyone is looking for economies of scale when it comes to capturing and disseminating huge quantities of fragmented data residing with many provider endpoints. Benefitting from strong positive network effects in connecting parties together is the aim of the game. A common platform reduces the adoption barriers and decreases the overall cost and time of ESG data capture and reporting. Such a platform should also provide shared services that financial services can leverage to accelerate the creation of in-house ESG capabilities for their respective customer base.

3. Interconnected communities with a common governance framework 

Independent businesses working together across regions and business domains deliver a strong statement about an institution’s commitment to ESG impact and the fight against climate change. Solving the data capture and dissemination issue is global and requires different domains within the financial service industry to work together (e.g., banking, capital markets, insurance). To make that work, one needs to create a way of working that allows stakeholders from different parts of the industry to share notes and work together towards common goals. Executives from various financial service firms told us they also want to have skin in the game. They want to be able to drive the strategic development priorities of such a common platform’s core and ancillary services to decrease the risk of building solutions that don’t suit the needs of the ecosystem. The time is ripe for a market-owned and operated platform rather than a mesh of disjointed, silo-based approaches.

Why an ESG-data management & reporting common platform makes sense

When speaking about market-owned platforms, the term ‘market utility’, ‘marketplace’ or ‘multi-side platform’ comes to mind. There is no panacea here, no one-size-fits-all. But there are lessons from the past and best practices we can leverage when designing such a platform. Let’s review some of the key ones.

In general, business ecosystems/market platforms help address several barriers[1] on the road to building a global, comprehensive, trusted, and transparent ESG-data management infrastructure.

1. The first barrier has to do with fragmentation. Fragmentation in the production (e.g., by the Corporates or issuers) and consumption (e.g., by banks or investment managers) of ESG taxonomy-related data. The two parties need a trusted intermediary to match both sides, i.e., to help corporates capture and submit their data once, and to help banks assess their loans portfolio to thousands of corporates in a streamlined, centralised way.
2. The second barrier is the need for trust. Everyone in the ecosystem needs to rely on data submitted by somebody else. There is a need for a set of independent parties to validate the accuracy and timeliness of the data.
3. The third one is the need for more (co-)innovation between stakeholders. Market platforms provide common, core services allowing their users to innovate, developing new innovative solutions for their own customers, either together with some of their peers or as part of their own ESG strategy.
4. The fourth and final barrier is the need for coordination across industries, globally. As collecting and disseminating ESG-data to support the transition is a massive endeavour and involves many stakeholders in different regions and business domains, there is a need for some orchestration mechanisms to keep all players aligned in terms of the scope of data, common service priorities, and speed of roll-out. Platforms need agile and respected orchestrators to speed up the net-zero pledges transition. These central nodes of coordination (i) help build the ecosystem infrastructure and governance, (ii) encourage all relevant parties to join and (iii) help with the adherence to the industry standards.

The long-term viability of shared service platforms, in ESG data management and elsewhere, lies in their capability to attract the right partners, users, and owners (the market shapers) in a timely fashion, with the right value proposition for each of them and the appropriate user governance.

Starting from a large, accessible target user pool is of course an advantage. Being backed by an established, neutral market leader helps with market traction and attracting the right partners.

Having a large pool of complementary partners, coming from different industries and regions make the ecosystem more effective and attractive. 

The Greenomy platform: inclusive and transparent, user-driven, and user-owned

In this context, Greenomy’s objective is to be a leading end-to-end, neutral, and inclusive ESG data management platform. As such, Greenomy aims at:

1. lowering the costs for its owners and users;
2. reducing overall operational risk and;
3. allowing its owners and users to improve their service to their respective customer base.

Greenomy’s goal is to satisfy the requirements of the financial community to accurately generate their ESG extra-financial reporting. This includes helping to build ESG Taxonomies worldwide and setting up trusted and scalable infrastructures to collect data, calculate scores, and generate official reporting. As this is a global challenge, Greenomy aims at creating positive network externalities by orchestrating collaboration and connection between stakeholders across different business domains and deploying the infrastructure globally.

Inclusiveness is key to building critical mass. To do so, Greenomy has built a set of specific platform services for all stakeholders in the ESG-data value chain. Corporates, banks,  credit agencies, auditors, investment managers, and market infrastructures of all sizes can all use a portal tuned to their own requirements, giving them a unique, secure 360° view of all the ESG-data collected and processed in the Greenomy community.

To encourage continuous, active contribution of the community, users that contribute to expanding the breadth and depth of data collected and connected end-points have the possibility to become shareholders of the Greenomy platform. This will ensure that key stakeholders have a clear voice in driving the evolution of the common platform and will further accelerate its impact.

Diversity is a strength. From its inception, Greenomy has been built as an open model. Open to other ESG frameworks and open to collaboration with complementary partners. Today, Greenomy collaborates with a growing network of consulting, data, and integration partners. The sheer diversity of contributors enables a rapid scale-up of the platform as a one-stop-shop ESG data marketplace with unmatched co-innovation capabilities.

Be an ESG data management market shaper, join the Greenomy platform!
 

[1] Based on “When a business ecosystem is the answer to sustainability challenges”, David Young, Ulrich Pidun, Balázs Zoletnik, and Simon Beck, Boston Consulting Group, 2022.