Is your finance team ready for ESG?

By Daniel Chow

ESG, a set of standards and frameworks related to Environmental, Social and Governance criteria, is already a corporate hot topic.

Borne out of the realization and acceptance that business activities directly impact the environment and well-being of society, there is an increasing demand for ESG data and transparency from multiple stakeholders.

governance, data management, accounting and reporting – to manage the completely new data sets and disclosures that will be required to meet the expected regulations and reporting requirements.

Name: Daniel Chow

Title: Principal, Senior Financial Specialist

Organization: Aptitude Software

Location: London

Daniel joined Aptitude Software in 2019 as a Senior Finance Specialist. As a member of the Product Strategy and Innovation Team, Daniel serves as an accounting and financial reporting subject matter expert on IFRS 17 and subledger development. Daniel is a Chartered Accountant and is experienced in IT and business change with an indepth understanding of dataflow and control processes. He has held roles at UBS, HSBC, Barclays, and PwC.

Investors are increasingly asking for and factoring non-financial information into business analysis and valuation models to support their investment decisions. Business leaders are also assimilating ESG data into their management decision-making process to gain a holistic view of the risks and opportunities their companies are exposed to. Finally, consumers are demanding sustainability information to inform buying habits that are aligned with their values. This is especially true of Gen Z, 75% of whom say sustainability is more important than brand names (source).

The development of ESG regulations by standard-setting boards is likely to be a dynamic, evolving journey and is only just beginning. And it will likely fall to Finance teams – already well versed in risk management,

From voluntary to regulatory

Until now, ESG reporting has been mostly voluntary, reflecting the recognition that it can act as a key driver of enterprise value. However, standards boards and regulators are now moving to codify ESG regulations, and Finance functions are being tapped to lead compliance initiatives.

In addition to disclosure requirements, mandatory ESG ratings and certification processes are expected to increase. Companies who perform poorly will take hits to their share price and likely to be starved of capital. By 2030, poor performers are expected to be weeded out and C-suite and Directors to be personally liable for ESG breaches.