More than 72% of financial institutions plan to invest heavily in ESG technology: Survey
As the world faces growing climate related risks, over 72% global financial institutions plan to spend up to $500,000 or more on ESG (environmental, social, and governance) technology enhancing work on climate risk solutions, with future investments likely to be directed towards emissions data, transitional climate risk modelling, and regulatory reporting tools, found a survey.
Titled ‘Chartis Market View: ESG and Climate Risk Survey’, the report analyses how global financial institutions are integrating ESG and climate risk factors into their risk management and investment decision-making processes. BCT Digital in collaboration with Chartis Research Thursday published the findings of their extensive ESG and Climate Risk Survey.
The survey captured insights from 77 ESG and climate risk practitioners representing financial institutions with assets under management ranging from $1 billion to $500 billion based in the APAC, North America, Europe and the MENA region.
As per the findings, when it comes to ESG, 52% of the respondents indicated regulatory compliance, being the most significant challenge. About 48% of the respondents identified risk assessment and mapping relevant ESG whereas another 48% viewed integrating ESG into operational and financial workflows as significant challenges.
With respect to climate risk, the main challenges are meeting regulatory stress testing expectations (67%), accurate GHG (Greenhouse gas) accounting (56%) and integrating climate risk operationally into product lines (50%).
Most firms review their ESG strategies quarterly, spending an average of $250,000 to $500,000 annually, with North American and European institutions more likely to exceed $500,000. The next year’s investments are expected to focus on ESG data and scoring products, governance, risk management and compliance (GRC) solutions, and regulatory compliance and reporting tools.
“There is a lack of uniformity in ESG and climate risk reporting standards; different countries and regions may have their own frameworks and definitions. This disparity makes it challenging for multinational corporations to maintain consistent reporting,” said Jaya Vaidhyanathan, CEO, BCT Digital.
The survey covered industry segments like retail, corporate and commercial banking, asset management, private wealth management, broker-dealers, cooperative banks, microfinance institutions, credit unions, and non-bank financial institutions.
“Compliance with ESG guidelines can be a challenge for many financial institutions, and data and data management are central to the compliance process. Having a fully integrated framework which enables data management across the entire value chain is crucial,” said Sid Dash, Chief Researcher, Chartis.
