SWIFT for Sustainability

Alexander Stevens, CEO of Greenomy, says reporting simplicity and standardisation is essential the development of a sustainable economy.

The world is continuing to hurtle towards catastrophic increases in global warming, according to the latest Intergovernmental Panel on Climate Change (IPCC) report published last month.

Unveiling the report, IPCC Chair Hoesung Lee said “half measures are no longer an option” in the face of unsustainable use of natural resources, growing urbanisation, social inequalities, losses and damages from extreme events and the legacy of a pandemic.

IPCC Working Group II Co-Chair Debra Roberts, said: “Tackling all these different challenges involves everyone – governments, the private sector, civil society – working together to prioritise risk reduction, as well as equity and justice, in decision-making and investment.”

Because of the importance of mobilising private capital, effective sustainability reporting by asset owners, managers and the companies in which they invest will be a critical part of the more urgent approach needed to manage and limit climate change.

Swathes of new legislation including the EU’s Sustainable Finance Disclosure Regulation; its Corporate Sustainability Reporting Directive; multiple green taxonomies; and mandatory reporting in line with Taskforce on Climate-related Financial Disclosures (TCFD) are all designed to ensure greater transparency of the ESG risks facing – and created by – companies across the world.

Codifying sustainability

Yet attempting to comply with so many pieces of legislation – not to mention reporting against the voluntary standards of the Global Reporting Initiative and/or the Sustainable Accounting Standards Board – creates something of a challenge for anyone at the reporting coalface.

Alexander Stevens, CEO of Greenomy, a green fintech that has developed a platform to consolidate ESG reporting requirements, previously worked as a policy officer at the European Commission. “I was looking through the EU taxonomy and the SFDR legislation, which is thousands of pages. It is a lot of companies to get through and comply with.”

Stevens says he wanted to alleviate the information overload for companies, as well as their investors and lenders, when complying with ESG reporting requirements.

The response was Greenomy, which was formed at the end of 2020 and which has since secured investment from partners including financial market infrastructure service provider Euroclear.

The platform has ‘codified’ the sustainability legislation to provide a single portal through which companies can input their various ESG metrics, policies and practices. The platform then provides reports to asset owners, managers and other relevant parties that can inform investment decision-making.

Simultaneously asset owners, managers and banks will also be able to use Greenomy to meet their own ESG reporting obligations, including SFDR, but also UK reporting requirements in line with TCFD recommendations.

“We have integrated TCFD into the solution and we are working to ensure different legislation across the globe has been codified so that asset owners can import their ESG data.”

Stevens says the goal is to be the SWIFT – the member-owned global international payments network – of sustainable data.

He says: “The objective over the next four years is to create a market infrastructure using a neutral platform that will reduce costs. The idea is to be the equivalent of SWIFT but for ESG data.”

Stevens continues: “We want to scale the solution and make it accessible to as many players in the market as possible and help them work together apply to these standards and then move forward. We have to keep an eye on all the new legislation that comes up.”

Greenomy is working with the European Financial Reporting Advisory Group’s digitisation working group and the Financial Conduct Authority digital sandbox in the UK, with the aim of offering solutions that will assist firms, investors and regulators as they drive economies toward net zero.

“We’re keeping a close eye on the development of the UK taxonomy to codify that into the solution. We will run a pilot with UK investors, asset managers, credit institutions to make sure that they’re all connected to this infrastructure.”

He adds: “If everyone is connected it will implement the legislation faster by helping the flow of ESG data, which will eventually drive capital towards more sustainable companies.”

Stevens says Greenomy has already established a collective agreement with banks in Belgium as a conduit for regulatory sustainability reporting and Stevens is having conversations with bodies in other European countries with a view to establishing similar common arrangements.

The firm is also parsing national taxonomies from around the world in order to support the flow of ESG-related information between institutions and corporates across jurisdictions.

Verified data

With corporates uploading sustainability information to the platform, there remains scope for greenwashing. Stevens points out that the large firms captured under CSRD will be providing information already verified by external auditors. For smaller firms, Greenomy is able to consolidate the information into formatted reports that can be submitted for third-party verification.

“The reporting can downloaded and sent to auditors so that they can cross check the ESG data,” he says.

If Stevens’ ambitions to be the SWIFT of ESG data is to be realised, regulators will effectively need to endorse the platform as a single-entry point provided by a private company. This is not a step lightly taken, but there are established precedents with existing financial market infrastructure providers, such as Euroclear and SWIFT, which have already developed and refined necessarily robust governance models and structures.

He says: “Regulators never want to take the risk in creating infrastructure. That’s why we see public/private sector entities which are led and managed by the private sector, but central banks and regulators are part of the oversight committees.”

He continues: “I think that’s the best model going forward: private sector-led initiatives set up the infrastructure; all the major players come on board; it is licenced by the regulators, which also take an oversight role.”

Stevens says that since regulators have an interest in simplifying and standardising legislation, they are likely to look favourably on a common platform that allows corporates, asset owners and asset managers to import and receive ESG information.

He says that Greenomy is already being well received in the private sector, with CFOs recognising that demonstrable compliance with sustainability legislation is critical to their cost of funds.

“This is about managing climate change. The faster we can have corporates that are able to submit their ESG data, and it can be measured, the easier it’s going to be done for financial sector to allocate capital towards that sector and boost the real economy and make it more sustainable.”

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2023 ESG Investor Ltd. Company No. 12893343. ESG Investor Ltd, Fox Court, 14 Grays Inn Road, London, WC1X 8HN

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