The added value of fintechs in ESG data management

To meet regulatory requirements and growing client demands, their sustainability strategy must be comprehensive and rely on accurate indicators. ESG teams are responsible for finding data sources that cover sustainability themes across all portfolios. For over 80% of financial institutions, more than three sources are needed to obtain the desired indicators. These various providers have different methodologies (e.g., formats, corporate structure), making the reconciliation of data with portfolio investments (matching) very complex and time-consuming: more than 80% of ESG analysts' time is spent on this task.

ESG data management is thus identified as a source of numerous difficulties. The biggest challenges for financial actors include the constant evolution of ESG (for 55% of financial actors*), managing multiple ESG data sources (for 50% of financial actors*), and linking ESG content to financial instruments (for 48% of financial actors*).

After investing in costly internal technological developments to automate data centralization and support ESG teams, financial actors find these solutions are not suited to the complexity and constant evolution of the ESG landscape

For example, when carbon data from providers diverge, identifying the anomaly is complex. It is imperative to calculate and compare correlations between these data, verify if discrepancies are due to a missing update, or if a significant variation in one of the scopes is related to a financial operation affecting a company in the value chain.

The numerous limitations of internal development then emerge: technical restrictions due to lack of tool flexibility, lack of industry expertise to cover numerous themes, or the consequences of these restrictions in terms of operational risk and accumulated costs.  

Thus, outsourcing ESG data management becomes necessary.

Based on the pitfalls of internal development, the keys to selecting a good dedicated technology partner can be identified:

• Flexibility: The financial actor must be free in their choice of data sources, controls to implement, matching rules, or calculations.
  
• Scalability: The platform must support all teams, adapting to the continuous increase in requirements.
• Evolutivity: Regulatory developments and market practices must be monitored to anticipate future needs.

This is what fintechs like WeeFin offer through the functionalities of ESG Connect. Allowing an average saving of 77% compared to internal development, the platform enables sustainability to be used as a real tool for differentiation.

*Source: *Bloomberg, ESG Data Acquisition & Management Survey 2023

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