Sustainable finance experts agree the sector needs unified data

A group of sustainable finance experts, including several Bayesian graduates, met to discuss issues in the sector.

At a recent event at Bayes, asset managers met with experts in data management and research to discuss the challenges and opportunities in developing a truly sustainable financial sector.

Participants from asset management, corporate governance and data science provided perspectives on how the sector can help address current and future environmental and social challenges related to decarbonisation and climate finance. This is against the backdrop of environmental, social and governance (ESG) issues, which have gained prominence but are now facing a backlash.

Bayes is offering new Master’s degree programmes in Sustainable Management and Finance from September.

Antonios Panagiotopoulos, executive director of ESG and climate research at MSCI Inc., said data is key, explaining that after starting out in the oil and gas sector, he spent nearly a decade working on sustainability. Illustrating the critical importance of data, Antonios, who graduated with a master’s degree in energy, trade and finance from Bayes in 2007, said his firm publishes about 80 million data points on ESG, climate and physical risk each year.

He added that data remains a challenge. For example, when looking at a company’s emissions, it can be quite complicated to capture the company’s direct (Scope 1 and 2) and indirect (Scope 3) emissions, generated upstream and downstream from its core operations.

“The actual operational emissions (Scope 1 and 2) that companies need to know are only disclosed by less than 50 percent of the universe of 10,000 companies, so data availability is an issue. Another challenge is that rating agencies have always looked back and maybe six months to a year into the future—with three or four stars on what future projections might mean. The challenge for us is that we have to forecast emissions out to 2050.”

Rafael Silvestre, a net-zero finance specialist with the United Nations-backed Principles for Responsible Investment (UNPRI) program, spoke about his early career as an electrical engineer in Brazil, where he focused on green energy projects, including hydropower, solar and wind. When he completed his MBA at Bayes in 2021, he recalls, “there was a lot of interest in sustainability and decarbonization across industries and sectors.”

Since then, he said, there has been both convergence and growth in regulation and standards – most notably the EU Directive on Corporate Sustainability Reporting, which strengthens the rules on environmental and social reporting. He also pointed to the creation of the International Sustainability Standards Board. Both organisations have merged with the existing framework of the Climate-related Financial Disclosures Task Force.

Rafeal said such initiatives have improved standardization, but there is still much work to be done.

While agreeing that data remains a fundamental challenge for those looking to finance the transition to sustainable energy, he also highlighted ongoing issues with investing in emerging markets and developing economies where the pipeline of bankable projects is insufficient.