• ESG Data Gaps: Polling at Bloomberg’s Sustainable Finance Forum revealed that data coverage and quality issues are the biggest ESG data management challenge.
• ISSB Standards in Focus: The International Sustainability Standards Board (ISSB) introduced new disclosure standards, but implementation challenges remain.
• Auditor Role Grows: Auditors will play a crucial role in helping companies ensure ESG disclosures meet investor needs.

The ESG Data Landscape:

As climate risks and policy shifts reshape the business environment, investors are under growing pressure to make decisions based on reliable ESG data. Polling at the Bloomberg Sustainable Finance Forum revealed that data coverage and quality are the primary challenges for organizations managing ESG reporting.

Emerging Standards:

In June 2023, the ISSB introduced the IFRS Sustainability Disclosure Standards, designed to improve climate-related reporting. However, discussions on the adoption and effective implementation of these standards are ongoing.

Linda French, Global Head of Sustainability Policy and Regulation at JP Morgan, emphasized, “It’s incredibly important to be engaged in the global ISSB adoption and implementation conversation right now because we are very much at an inflection point in the ecosystem.”

Related Article: Bloomberg Launches New Tool to Help Investors Assess Biodiversity, Nature-Related Risks

European Challenge:

In Europe, large companies already face stringent reporting requirements under the Corporate Sustainability Reporting Directive (CSRD). However, a disconnect often exists between the frameworks companies report on and the metrics investors use to make decisions.

Colleen Denzler, Chief Sustainability Officer at Loomis Sayles & Company, noted, “When you think about what asset owners and companies operating in Europe are going to need to deliver, it’s really coming down to a framework of governance, a framework of risk, and I would even go so far as to say a framework of fear.”

Materiality and Auditors’ Role:

The complexity of materiality in the ESG context—whether financial or environmental—requires a deeper understanding. Auditors are crucial in evaluating ESG-related risks, ensuring the accuracy and relevance of disclosures for decision-making.

Linda French added, “The role of auditors is going to be incredibly important in how this develops—because this is not just about doing the disclosure, it’s about the process you go through to get to that disclosure.”

Moving Forward:

While frameworks like the ISSB are advancing, more work is needed. The International Organization of Securities Commissions (IOSCO) has endorsed the standards but stresses ongoing refinement.

Jean-Paul Servais, IOSCO chairman, stated, “We think that [the existing standards] can be useful as you make informed decisions about the allocation of capital. But while we are making progress, there is much more data to collect and capacity to build.”

The Bottom Line:

Improving the ESG data ecosystem will require collaboration across industries, with auditors playing a key role in refining and implementing standards. The push for better data will ultimately help investors make more informed decisions in a rapidly changing environment.