Enhanced lending and investment decisions through integrated ESG analysis
Combining ESG data with financial data will turn it into a powerful predictive tool for capital providers says Dr Jane Thostrup Jagd, Director of Net Zero Finance at the We Mean Business Coalition. After a fantastic presentation at XBRL Europe’s Digital Reporting in Europe event, we caught up with her for an interview.
As she explains, investors and lenders today use ESG data primarily as an extra screening layer on top of their financial analysis. They rely on composite ratings that are based on stale data (often 18 months old), and provide very little predictive value.
The future? New forms of integrated analysis that combine both financial and ESG data to provide deeper, more comprehensive insights into risks, opportunities and company performance.
Making this vision a reality means that new mandatory sustainability disclosure obligations need to kick in, to provide new levels of comparability (at least within key markets). It also means leaving PDFs behind. It will require mandatory digital sustainability disclosures that are easily available in central repositories. AI is going to be a significant tool – in combination with the XBRL structure that ensures trustable, decision-grade outputs. The next steps in the near term will be identifying the most informative metrics and developing integrated analysis methods.
As this enhanced decision-making becomes mark of “business as usual”, we will increasingly see capital being funnelled towards those companies – that have both invested in risk mitigation and resilience and – crucially – are demonstrating that resilience through high-quality, discoverable ESG disclosures. Expect big impacts, magnified by supply-chain reporting.
It’s time to think differently about ESG reports, says Jane. “ESG is not a marketing exercise. It is valuable information that can tell capital providers about a company’s future.”
Don’t miss Jane’s fascinating full interview here.
