The recent VelocityEHS ESG Virtual Conference featured an enlightening conversation between Roger Bottum, Senior Vice President of Product at VelocityEHS, and Marco Bartholdy, ESG Manager at CVC. The discussion delved into the intricacies of making ESG data investor-grade and shed light on its critical role in shaping the future of investments.
Understanding the Essence of ESG Data
From an investor’s standpoint, ESG data serves a dual purpose: evaluating the financial impact on investments and assessing the broader sustainability impact beyond financial metrics. Marco Bartholdy emphasized the importance of distinguishing between these perspectives, noting that sustainability data extends its influence on a wider audience, including regulators, employees, and affected communities.
Private equity firms, such as CVC, hold a unique position in this landscape. Unlike traditional investment classes, they can often take substantial stakes in smaller companies, allowing for greater influence on ESG management. For these firms, ESG data isn’t just a reporting requirement; it’s a crucial tool for measuring and managing the positive and negative impacts of ESG factors on the businesses they invest in, and it influences future investment decisions.
Navigating the ESG Landscape
One of the challenges organizations face is understanding how ESG data applies to them specifically. Bartholdy stressed the need for efficient data management, suggesting investments in technology and automation to streamline the data collection process. The importance of materiality assessments, to gauge both single and double materiality, was highlighted. Single materiality focuses on the financial impact of ESG topics, while double materiality also considers the broader impact on society, environment, and economy.
CVC uses materiality assessments to prioritize ESG topics based on stakeholder engagement, internal evaluations, and customer feedback. Businesses are encouraged to focus on data that is aligned with an organization’s impact on external issues.
Decoding Investor-Grade Data
Bartholdy emphasized the significance of investor-grade data in the modern business landscape. While sustainability data has existed for decades, its newfound importance requires a level of standardization and comparability. Current standards, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and the International Sustainability Standards Board (ISSB), represent a step in the right direction. The integration of recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD) and the use of the GHG protocol for calculating carbon emissions add credibility to these frameworks.
Chief Financial Officers (CFOs) play a crucial role in controlling ESG data, necessitating their familiarity with emerging frameworks. The Corporate Sustainability Reporting Directive (CSRD), impacting companies immediately, and the International Sustainability Standards Board (ISSB), aligning sustainability reporting with financial reporting standards, are key frameworks to watch. The Global Reporting Initiative (GRI) remains a prominent voluntary reporting framework, focusing on double materiality.
Material Metrics for Investment Decisions
When it comes to deciding whether to invest, specific metrics take centre stage. While every investor may prioritize different factors, material topics such as climate change, diversity, equity, inclusion, and cybersecurity are among the most common considerations.
Efficiency in Data Collection
Efficiency in ESG data collection is paramount. Bartholdy urged companies to treat ESG data with the same rigor as financial data. Technology and automation play a vital role in managing data efficiently, enhancing collaboration with finance and reporting teams. Choosing the right software system tailored to the organization’s needs is crucial for effective data collection and reporting.
Emerging Trends in Sustainability Reporting
Looking ahead, Bartholdy emphasized the importance of letting strategy lead reporting. ESG and sustainability data should extend beyond the “carbon tunnel vision” and encompass broader priorities like nature and biodiversity. Strategic focus on stakeholder priorities ensures that the reported data holds value and contributes meaningfully to the organization’s sustainability goals.
In conclusion, the conversation between Roger Bottum and Marco Bartholdy provided valuable insights into the world of investor-grade ESG data. As organizations navigate the complexities of reporting, adopting best practices, leveraging technology, and staying abreast of evolving frameworks will be instrumental in creating a sustainable and transparent future for investments. The journey toward making ESG data investor-grade is not just a compliance requirement; it’s a strategic imperative for businesses seeking to thrive in a responsible and resilient global economy.
For the full, detailed expert discussion on investor grade ESG data, watch the on-demand session.
VelocityEHS Can Help!
The ESG Solution, part of the VelocityEHS Accelerate® Platform, gives you the support you need to obtain, manage, and report investment-grade ESG data. Our Utility Data Sync capability interfaces directly with your utility providers to automatically collect data, apply correct emission factors, and convert your data to the right units, minimizing potential for error and administrative burdens. The solution also gives you the ability to track all three scopes of your GHG emissions, with reporting capabilities aligned with major ESG disclosure frameworks.
Contact us today to learn more about how we can help you to improve your EHS & ESG programs.