With growing trends towards global Environmental, Social and Governance (ESG) and climate risk spending, over 72 per cent of financial institutions are now planning on investing upto USD 5,00,00 on ESG technology, a new survey has revealed. According to ‘Chartis Market View: ESG and Climate Risk Survey’ by Chartis Research and BCT Digital, most firms currently review their ESG strategies quarterly, spending an average of USD 2,50,000 to 5,00,000 annually.
The investments in ESG are likely to focus on data and scoring products as more than 60 per cent of the respondents emphasised on this segment, followed by the spending on ESG-focused governance, risk management and compliance (GRC) solutions.
The survey included 77 ESG and climate risk practitioners representing financial institutions with assets under management ranging from USD one billion to USD 500 billion based in the Asia-Pacific, North America, Europe, Latin America and the Middle East and North Africa (MENA) region.
Keeping up with the pace of regulation remains the biggest task for financial institutions as nearly 52 per cent of the respondents indicated regulatory compliance as the major challenge. About 48 per cent of the respondents identified risk assessment, which involves mapping which ESG factors matter to your business, as a significant challenge. Along with this, around 48 per cent viewed integrating ESG into operational and financial workflows as a challenging task.
Sid Dash, Chief Researcher, Chartis said, “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.”
Meeting regulatory stress testing expectations remains the main challenge in the climate risk domain with nearly 67 per cent of the institutions highlighting the issue. Accurate greenhouse gas accounting (56 per cent) and integrating climate risk operationally into product lines (50 per cent) account for the next two big tasks which pose a challenge in this segment.
“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,” Jaya Vaidhyanathan, CEO, BCT Digital, said during the report launch.
Currently, most firms spend between USD 250,000 and USD 500,000 on climate risk solutions, with future investments likely to be directed towards emissions data, transitional climate risk modelling, and regulatory reporting tools.
