A survey released on Friday showed more than 70 percent of global financial institutions intend to invest US$500,000 or more annually in ESG technology within the next year. “More than half of those considered keeping pace with evolving regulations as the greatest challenge related to ESG,” a survey by BCT Digital, a global provider of Fintech, Regtech, and Sustaintech solutions, in collaboration with Chartis Research.
The results of the survey indicated that most firms review the strategies adopted on ESG every quarter. The pegged amount for spending is annually at ranges between $250,000 and $500,000. It is more likely to spend over $500,000 annually on ESG by North American and European institutions. Investments next year will likely focus on ESG data and scoring products, GRC solutions, and regulatory compliance and reporting tools.
The poll covered 77 ESG and climate risk practitioners from financial institutions with assets under management ranging from $1 billion to $500 billion, spread across the Asia Pacific, North America, Europe, and the MENA (Middle East and North Africa) region. The survey says that on the stakeholder side, 52% of the respondents regarded adhering to statutory regulations as a major challenge to ESG. While 48% of the respondents mentioned risk assessment and mapping of relevant ESG factors, another 48% pointed out the integration of ESG into operational and financial workflows as significant challenges.
The key challenges related to climate risk concern the following: meeting regulatory stress testing expectations, 67 percent; GHG accounting accuracy, 56 percent; and integrating climate risk operationally in product lines, 50 percent. For most firms, investments in solutions for climate-related risk are between $250,000 and $500,000, while future investments will likely be channeled to emissions data, tools for transitional climate risk modeling, and regulatory reporting tools.
“According to the findings, there is inconsistency in country ESG and climate risk reporting standards, giving a different framework and definition. This gives Multinational Corporations a challenge of consistency in reporting. The granular findings of this survey will help us, financial institutions, enhance their ESG and climate risk management frameworks,” said Jaya Vaidhyanathan, CEO of BCT Digital. “BCT Digital is well-prepared to meet the rising needs of the ESG and climate risk markets, and on this comprehensive survey, we are even more assured of our ability to do so,” insisted Vaidhyanathan.
“Compliance with ESG guidelines can be a stretch for most financial institutions, and data management can be central to the compliance process. Having a fully integrated framework enabler of data management across the entire value chain is important,” said Sid Dash, chief researcher at Chartis.
The survey responded to the entire gamut of the financial sector: retail, corporate and commercial banking, asset management, private wealth management, broker-dealers, cooperative banks, microfinance institutions, credit unions, and nonbank financial institutions.