In October 2021 we held a TechSprint focused on building technological solutions to overcome challenges faced by regulators in monitoring ESG Data and Disclosures.
Ten mixed-disciplined teams comprising 120 active participants worked to develop solutions to four use cases:
- How can technology enable regulators to verify that ESG disclosures by both listed companies and regulated financial services firms are accurate and complete?
- How can technology be better deployed by regulators to generate insights from ESG disclosures and other unstructured data sources to understand how regulated firms and listed issuers are approaching the transition to a more sustainable future, and to help determine any further regulatory intervention that is required?
- How can technology be used to support regulators in tracking and verifying regulated firms’ and listed issuers’ claims regarding the net-zero targets they are pursuing in their products, services and wider operations?
- How can technology help regulators determine the key areas and data points to consider as part of their methodology for designing a robust, reliable and accurate sustainable investment label, so that consumers can better understand their choices and compare the ESG characteristics of different financial products/providers?
The solutions developed ranged from a tool to help verify companies’ carbon offsetting programs to one that helped develop a sustainable investment label using an impact score. These solutions were then pitched to a demonstration day audience of over 200 participants from all over the world.
Speakers at the demonstration day included: Jessica Rusu (FCA Chief Data, Information and Intelligence Officer); Benoît Cœuré (Head of BIS Innovation Hub); Martin Moloney (IOSCO Secretary General); Ben Caldecott (Director of CGFI) and Sacha Sadan (FCA ESG Director).
In addition to the TechSprint, the FCA hosted two international regulatory roundtable sessions on the theme of GreenTech which brought together regulators from across the world to discuss shared challenges and develop an innovation ‘wishlist’ that they would like to see to accelerate their efforts in this space. A total of 59 regulators from 36 jurisdictions took part in the Regulatory Roundtable sessions, which also fostered conversations around international collaboration in the realm of GreenTech.
The level of engagement and discussions over the course of the TechSprint reinforced the importance of placing ESG considerations at the heart of financial decision making and taking brave, innovative steps towards tackling these challenges collaboratively.
The five winners’ announcements were:
Eureka solution + People’s Choice Award
Winner: Team 2 - Decentralised Carbon Offset/DeCO
Use case 3 (tracking and verifying companies’ claims regarding net zero targets) – The solution aims to track how companies are moving towards net zero targets by increasing transparency around companies’ carbon offsetting programs. It does so by verifying companies’ reports on their carbon footprint and offsetting using independent data from satellite imagery, drones and IoT devices.
Winner: Team 5 - HMRC-C
Use case 1, 2 and 4 (verifying accuracy and completeness of disclosures; generating insights from different data sources to determine regulatory intervention; and identifying data points to design a sustainable investment label) – The team proposed a mandatory carbon attribute to digital payments that carry the highest carbon intensity. The aim is to standardise carbon reporting and bring transparency around the consumption of carbon in the economy. This would incorporate spending data to measure carbon emissions, assigning carbon factors to key areas of activity e.g. amount spent on petrol. The tool would then aggregate and profile the carbon emissions captured.
Highly commended solution
Winner: Team 8 - The Badgers
Use case 4 (identifying data points to design a sustainable investment label) – The team developed a tool to help calculate an Impact Score which would in turn determine if a fund is eligible for an IMPACT Investing Badge. To calculate the Impact Score, it would take into account the change in ESG Score of the investee companies, the extent to which the companies utilise their voting rights, and the length of the investment.
Use case 2 (generating insights from different data sources to determine regulatory intervention) – The team built an SDG Tracker aligned with the UN Sustainable Development Goals to generate insights from multiple structured and unstructured data sources, e.g. news sources, to help determine any areas for regulatory intervention. This sought to provide a more holistic focus on both E and S of ESG.
View the other participants presentations
The Green Score
Use case 3 (tracking and verifying companies’ claims regarding net zero targets) – The team proposed a tool for investors and regulators to reliably track the latest environmental credentials of companies to make informed investment decisions using real data. The tool shows a total ‘green score’ from 1-10 and the information will be presented on a dashboard to show a breakdown of the scores by different criteria.
Rebuilding Climate Trust
Use case 4 (identifying data points to design a sustainable investment label) – The team developed a Climate Impact Label framework as a methodology for identifying meaningful metrics to design a sustainable investment label.
Use case 4 (identifying data points to design a sustainable investment label) – The team proposed a universal sustainability label by using four key metrics based on the UN Sustainable Development Goals and the World Economic Forum framework for Measuring Stakeholder Capitalism. This would produce a fact sheet on the specific fund and provide an overview of the fund’s performance against the chosen metrics.
Use case 2 (generating insights from different data sources to determine regulatory intervention) – The team proposed a dashboard style report for regulators to assess companies’ progress against industry benchmarks and identify areas where a company lacks the relevant information in their disclosures. The solution comprises of an AI-enhanced data quality scoring mechanism, cross-referenced data across organisations, insights into data quality performance, identification of unintended errors, issues and pitfalls, and a mechanism to assist regulators in raising concerns with organisations.
Use case 3 (tracking and verifying companies’ claims regarding net zero targets) – The solution measures the appropriateness, credibility and feasibility of a firm’s net zero targets by collecting and analysing data on the relevant firm and sector targets and emissions, and scoring each firm on the feasibility of hitting their commitments against the sector and geographic averages.
Use case 3 (tracking and verifying companies’ claims regarding net zero targets) – The team proposed a regulator owned ESG open data platform providing a ‘credit score’ based on publicly available data. This would initially focus on a verified data profile of a company with Carbon data sets to examine their Carbon score.