ASIFMA Offers Recommendations to Address ESG Data Challenges

The report, released by ASIFMA and FOSDA, says the recommendations are critical to supporting and enabling the further development of green and sustainable markets in Asia.

ASIFMA and the Future of Sustainable Data Alliance (FOSDA) have released the final report of a year-long review of the data challenges facing Asia Pacific markets as they look to further develop ESG investment and sustainable finance markets.

Asia needs an estimated USD 66 trillion in climate finance investment over the next three decades, which is over half the investment required globally to limit the global temperature rise to 1.5° Celsius, the report says. Yet, the future growth of ESG investment in Asia is “inextricably linked” to data – its availability, accessibility, reliability and comparability.

Some of the data issues highlighted in the report include inconsistent data; a lack of standard measurements of E, S, and G factors; the wide variation of individual ESG metrics across industries, markets, and companies; the differing quality of company disclosures; and poor quality data.

“Firms and investors are navigating a confusing landscape of disclosure frameworks, incentive structures, data collection methods, and external assessments developed and implemented in various markets and jurisdictions by both the public and private sectors,” the report says, adding that there are no single binding global taxonomy or classification systems for ‘green’ assets.

“The industry wants to see greater harmonisation yet a principles-based approach that allows for tailoring each region’s specific conditions, such as relative levels of economic development.”

The report offers eight recommendations that it says are critical to supporting and enabling the further development of green and sustainable markets in Asia:

  1. A greater convergence towards a principles-based global (or at least regional) taxonomy
  2. Higher, more consistent corporate disclosure standards between jurisdictions and sectors
  3. Encouragement of higher standards of analysis, with incentives for more holistic and robust approaches to ESG measurement and analysis
  4. Policy and regulation to support innovation and technologies that enable ESG and sustainable finance capabilities
  5. A focus on education and skills to support ESG and sustainable finance capability
  6. Higher standards and accountability for ESG ratings providers, potentially including regulation, and clear and harmonised requirements for product disclosure
  7. Harmonisation between ESG standards and frameworks such as UN SDGs, and policy on climate change and bank supervision at systemic level, including on climate risk
  8. Ongoing partnership and dialogue between the public and private sectors, as well as between stakeholders such companies and investors on disclosure and reporting standards

“As the private and public sectors plan ahead for post-Covid recovery, we are at a critical juncture to identify data gaps and obstacles to scaling ESG and sustainable finance development, and to work towards developing and accelerating green recovery strategies,” the report says.

“It is therefore important for Asia to focus on the data requirements for supporting ESG to ensure data asymmetries do not stall further efforts to developing and scale sustainable finance in the region.”

The full report is available here.

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