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  5. ESG Strategies Are More Than a Competitive Differentiator for Investors: They Are Becoming a Regulatory Imperative

ESG Strategies Are More Than a Competitive Differentiator for Investors: They Are Becoming a Regulatory Imperative

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14 December 2023
Ashley Longabaugh

A convergence of forces are driving ESG adoption across the globe...but ESG is clouded in political polarity, greenwashing, and disjointed regulatory frameworks leading to significant challenges for financial institutions. The driving forces for ESG adoption are multi-faceted:

The widespread adoption of ESG investing continues to take place on a global level. However, the industry faces significant challenges across multiple fronts, particularly an ever-changing and complex ESG data regulatory environment, as well as achieving data objectivity.

A growth in investor pressure and regulatory mandates have created fragmented reporting and disclosure frameworks creating a complex environment for regulatory adherence driving the need for robust data analytics and reporting product development; the data vendor and solutions landscape is incredibly fragmented, calling into question the ability to make data accessible, stitch together data sources, orchestrate consulting services, and create transparent and streamlined workflows.

Firms struggle to manage ESG data gaps and requirements, particularly as many data collection processes are siloed, manual, and spreadsheet-driven. The modernization of ESG data management practices towards more automated and integrated solutions is critical - it is not enough to view ESG strategies as an optional competitive differentiator - they are becoming a regulatory imperative and firms would be wise to assess ESG workflow integration capabilities and tools (e.g., regulatory disclosure, reporting, and analysis) in anticipation of a dynamic regulatory framework that emphasizes globality and transparency.

Celent’s upcoming report will look at the importance of strengthening and centralizing ESG data models, particularly through the implementation of nextgen technology-driven capabilities alongside existing solutions.