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ESGTree Expands Core Capabilities to Tackle EU SFDR Reporting for Financial Institutions

ESGTree Expands Core Capabilities to Tackle EU SFDR Reporting for Financial Institutions

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ESGTree, a cloud-based technology platform that provides Financial Institutions with a comprehensive Environmental, Social, and Governance (ESG) data solution, recently announced its expansion of SFDR capabilities available to clients. Under the SFDR automation stream, Its Principal Adverse Impact (PAI) automation tool simplifies and streamlines data management and reporting against European regulatory requirements.

The ESGTree Solution: From Burden to Opportunity

The SFDR is an EU regulatory initiative designed to improve transparency in sustainability claims of various investment products. ESGTree’s comprehensive SFDR solution includes:

  • Data collection aligned with SFDR requirements:
    • PAI Automation Tool: ESGTree’s digitized PAI reporting tool delivers a 360° solution to calculate, aggregate, and report on PAI indicators at both the fund level and entity level.
    • ESGTree simplifies the process of collecting SFDR-aligned data with its secure, cloud-based, multi-user platform that includes built-in guidance and expert support.
    • The platform translates legislation and technical indicators into an intuitive interface that empowers portfolio companies to track and enhance their performance.
  • Expert Guidance via Client Success Support
    • ESGTree’s dedicated team of ESG experts deliver unparalleled guidance to enhance SFDR alignment.
  • Educational Resources
    • ESGTree’s original and thorough Thought Leadership pieces serve as Guides through the SFDR reporting process, providing knowledge-sharing & insights on required metrics, regulatory updates, and reporting best practices.

A Holistic Approach to ESG Reporting Beyond SFDR

ESGTree offers financial institutions – including private equity firms and banks, a comprehensive Suite of Solutions to efficiently manage their ESG data. Beyond SFDR, our platform boasts an intuitive carbon calculator, customizable ESG frameworks, trends analysis, automated data management, and detailed dashboards, making it a singular, unified platform for ESG reporting.

“Our General Partners clients are consistently rated in the top 10% by their Limited Partners for ESG performance.” Says Shahzeb Irshad – SVP of Operations at ESGTree

“As regulatory landscapes evolve, so too must our approach to compliance and sustainability,” says Shahzeb Irshad – SVP of Operations at ESGTree. “Our SFDR reporting tool doesn’t just streamline the compliance process; it empowers financial institutions to uncover and harness the value of responsible investment, setting a new benchmark for ESG excellence.”

With ESGTree, financial institutions can leverage the power of cloud computing and advanced data solutions to not just comply with but excel under SFDR regulations, spearheading the movement towards a more sustainable financial ecosystem.

For more information on how ESGTree is redefining SFDR compliance and ESG disclosures, reach out at [email protected] or book a demo today.

To learn more about ESGTree’s SFDR Reporting Software click here.

About ESGTree

ESGTree is your all-encompassing solution for collecting, analyzing, and reporting ESG data. Designed with investors in mind, our cloud-based platform is fully customizable to meet your specific metrics and user experience needs. Our motto: “Making ESG work for you.”

Our Clients

We work with a range of financial institutions such as Impact Investors, Private Equity (PE) and Venture Capital (VC), Pension Funds, Development Finance Institutions (DFIs), Banks, Companies & more.

“ESGTree is great at helping to bring management teams on the same page. We view the ESGTree system and team as more of an extension of our company rather than a Software provider.“

Director, Investor Relationships at ICV Partners

“ESGTree streamlines our ESG reporting to our investors. Most notably, the Carbon Calculator feature, which reduces the time taken to calculate carbon emissions by 70%. Kudos to the ESGTree team for providing such a seamless user experience.“ Senior Market Analyst at Emburse

ESGTree provides powerful data solutions to help private equity (PE) and venture capital (VC) firms gather, collect, analyze, benchmark and report their ESG data and that  of their portfolio companies. Our carbon calculator, customizable and automated ESG frameworks, multi-level report viewing, trends analysis dashboard, and other features aimed to make ESG a value creation tool rather than a reporting burden.

Click here to learn more about our ESGTree’s ESG software solution for Private Equity & Venture Capital.

ESG Is Here to Stay!

ESG Is Here to Stay!

By 2025, ESG assets are estimated to exceed USD$50 trillion. In other words, one third of Assets Under Management (AUM) will be classified as ESG assets in the next three…
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Canada: ESGTree, CPA 4th Floor, 140 West mount Rd N, Waterloo,
ON N2L 3G6, Canada

United Kingdom: ESGTree, 33 Queen Street, London EC4R 1AP, United Kingdom

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The ISSB Standards: A Milestone in the Global Economy 

The ISSB Standards: A Milestone in the Global Economy

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On 26th June, 2023, the ISSB finally launched its inaugural sustainability standards, ushering in a new era in international corporate reporting

The International Sustainability Standards Board (ISSB) has issued its first two IFRS Sustainability Disclosure Standards: the IFRS S1, which provides a set of general disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term, and the IFRS S2 , which sets out specific climate-related disclosures and is designed to be used with IFRS S1.  Both standards fully incorporate the 4 pillars of the Task Force on Climate-related Financial Disclosures (TCFD),  namely Governance, Strategy, Risk Management, and Metrics and Targets. 

Interestingly, the TCFD – which has been adopted into UK law and is used voluntarily by many of the world’s biggest asset managers – has now moved into the administration of the ISSB. This merger, as well as the ISSB’s subsumption of the Sustainability Accounting Standards Board (SASB), marks a significant advancement in the ISSB’s promise of bringing cohesion among the plethora of sustainability standards and frameworks available for asset managers.

The International Sustainability Standards Board (ISSB)

The ISSB is a standards-setting body that focuses on creating standards for disclosing sustainability-related financial information. It was launched by the International Financial Reporting Standards (IFRS) Foundation on November 3, 2021 at COP26 in Glasgow.

The IFRS Foundation is a not-for-profit, public interest organization established “to develop high-quality, understandable, enforceable and globally accepted accounting and sustainability disclosure standards.” Alongside the ISSB, the IFRS foundation also established the longer-standing International Accounting Standards Board (IASB), primarily responsible for setting global financial accounting standards, namely the IFRS Accounting Standards, that are used by over 140 jurisdictions around the world.

The IFRS S1 and IFRS S2: In a Nutshell

While the final Standards contain several notable changes from the 2022 drafts , they continue to lean heavily on SASB’s industry-specific disclosure topics and strongly align with the European Sustainability Reporting Standards (ESRS),  Global Reporting Initiative (GRI), the Greenhouse Gas Protocol, and many more (see Figure 1 below).

IFRS S1: The IFRS S1, for instance, asks companies to disclose material information about sustainability-related risks and opportunities across their value chain alongside financial statements, and leverages the works of predecessor  organizations such as the Sustainability Accounting Standards Board (SASB)*, the Climate Disclosure Standards Board (CDSB) and the International Integrated Reporting Council (IIRC). This ensures a global baseline and allows the ISSB standards to be applicable to any accounting framework.

*To further provide nuance and context, IFRS S1 asks companies to consider using industry-based disclosure topics outlined in the SASB Standards for topics beyond climate, which are covered by IFRS S2. IFRS S1 also follows the architecture of TCFD for the core content of the disclosure

IFRS S2: Like IFRS S1, IFRS S2 requires companies to disclose material information*, specifically on climate-related risks and opportunities, that may affect their performance and prospects. It builds on the requirements of IFRS S1, fully incorporating the TCFD recommendations in its core content alongside additional details that go beyond TCFD (such as information about the planned use for carbon credits to achieve net emission targets, financed emissions, and measurement approaches for scope 3 emissions)

Key requirements for disclosures also include details on a company’s transition plans, its use of scenario analysis, quantitative data on scope 1-3 emissions, and how it intends to achieve climate-related targets, if any.

*IFRS S2 is also aligned with CDP’s Climate Questionnaire and the SASB standards, requiring industry-specific, cross-industry, and company-specific disclosures under metrics and targets.

In a nutshell, the S1 & S2 are characterized by the key elements highlighted in the Table below:


Adopting the ISSB Standards

The IOSCO Approval: Impact on Voluntary and Mandatory Reporting 

The International Organization of Securities Commissions (IOSCO) completed its independent assessment of the ISSB standards and officially endorsed them in July 2023.  This endorsement marked a major milestone toward making the Standards mandatory within many jurisdictions worldwide. With IOSCO’s backing, the IFRS S1 and S2 are expected to be adopted or adapted by its 130 member jurisdictions, representing over 95% of global financial markets. This will help transform the standards from voluntary to effectively mandatory in these regions.

Transition Groups & Reliefs

Now that IFRS S1 and IFRS S2 are issued, the ISSB will work with jurisdictions and companies to support adoption. It acknowledges that this level of reporting is “new for many, and represents a significant change in reporting practices globally,” so it has created a Transition Implementation Group that will act as a public forum for addressing practical questions and will support companies with capacity-building initiatives. For specific details on reliefs & adoption timeline, refer to Table 1 “Adoption Timeline & Reliefs”  above.

Challenges to Adoption

While such concessions will ease the reporting burden on many companies, smoothen the transition period, and encourage compliance, companies will still struggle with data gathering, verification, and technical compliance requirements. For companies looking to start their ISSB reporting today, it is essential for them to deploy mitigation strategies that will gear them up for the January 2024 reporting period. 

While the adoption of IFRS S1 and S2 may have seemed like a long-shot when they were first introduced, it is clear that they are here and ready to be reported on. In fact, we are currently in the first reporting cycle for the IFRS S1, but there’s a lot of legwork involved in setting up internal reporting capacity. So, early adoption and early assessments are really crucial for setting up that internal capacity in the face of upcoming regulations.

About ESGTree

ESGTree helps companies gather, analyze, and report on sustainability information, greatly reducing the time and effort required to comply with investor demand and regulation. Our platform automates all major industry-leading frameworks, along with Greenhouse Gas Protocol-aligned carbon calculations, to provide a holistic ESG solution for financial institutions. 

Purpose-built for private capital investors, ESGTree’s data automation solutions allow private equity and venture capital firms to gain insights into their portfolio companies’ ESG performance over time, attribute ESG data correctly, and benchmark their data to assess a portfolio company’s progress in relation to other comparable companies in the region. These insights enable investors to identify potential risks and opportunities and make informed investment decisions based on a portfolio company’s ESG performance. Our cloud-based platform and advisory services meet the needs of both seasoned ESG managers as well as those entering the world of ESG for the first time. 

 

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IFRS Sustainability Standards Launch: A New Era for Corporate Reporting

IFRS S1 and S2: Key Elements of ISSB Sustainability Standards

From Voluntary to Mandatory: IFRS S1 and S2 Impact on Reporting Practices

Challenges and Solutions in Adopting IFRS S1 & S2 Standards

ESGTree: Simplifying ESG Reporting and Compliance

Contact Us

Contact Us

Email

[email protected]

Office Addresses

Canada: ESGTree, CPA 4th Floor, 140 West mount Rd N, Waterloo,
ON N2L 3G6, Canada

United Kingdom: ESGTree, 33 Queen Street, London EC4R 1AP, United Kingdom

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What We’ve Learned Automating the ESG Data Convergence Initiative (EDCI) for Clients​

What We’ve Learned Automating the ESG Data Convergence Initiative (EDCI) for Clients

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Last year, private equity firm the Carlyle Group and pension fund the California Public Employees Retirement System (CalPERS) announced what could become a game changer for the private equity industry. The ESG Data Convergence Initiative, or EDCI, seeks to standardize ESG reporting for general partners (GPs) by creating a single framework for them to follow. The aim is to generate a critical mass of comparable information on how GPs’ portfolio companies are performing on ESG relative to each other, as well as to promote greater reporting transparency for limited partners (LPs). The data will be aggregated into an anonymized benchmark by the Boston Consulting Group (BCG).

Thus far, 350 leading LPs and GPs have agreed to participate in the project, or perhaps what at this point one can termed an experiment, that together represent over $28 trillion in assets under management.

ESG reporting standards

If successful, EDCI would be a breakthrough for the industry. Harmonizing ESG disclosures for private markets has conventionally been a gap in the financial market and is essential for sustainability efforts to be credible. In this case, the very investors demanding ESG are setting the parameters of what that means to them, and benchmarking that data to produce an overall picture of the ESG health of the industry.

On the other hand, EDCI does not (so far) provide guidance on how companies can best produce this data. What its benefits will be for GPs, who must now take on an additional reporting burden, will become clearer in the fullness of time.

ESGTree has had the privilege of automating the EDCI framework for its clients to ease this reporting burden. In the process, we have learned three key lessons about implementing the EDCI framework and the significance of it:

Three Key Learnings Automating EDCI

- EDCI’s current framework, consisting of 6 overall categories and 17 indicators, may not cover the needs of all GPs; add-ons are needed to satisfy broader LP due diligence.

EDCI pulls together the most salient data points from already existing ESG frameworks, such as carbon emissions, renewable energy and board diversity. However, this framework cannot be expected to cover all the points that non-participating LPs may require. In our experience automating the EDCI framework, we have, for example, built in add-ons like detailed diversity metrics in order to satisfy the particular demands of our clients’ ESG reporting. The experience has taught us that while EDCI is a significant step in the right direction, it might need to ramp up metrics in certain trending areas like diversity, equity and inclusion, as other LPs will have requirements beyond the framework’s six categories and 17 indicators.

- LP convergence around EDCI is a major driving factor for GP adoption.

EDCI is the brainchild of some of the biggest players in the private equity field. These players are converging around a set of core metrics that are critical to them as investors and sharing that data amongst each other for benchmarking purposes. Given that this framework is coming from within the industry itself, and supported by the influential Institutional Limited Partners Association (ILPA), there is an automatic push among GPs to adopt it. Only in its first two years, EDCI has the weight of around $28 trillion of assets under management behind it.

- There is still a lack of clarity among GPs around the benefits of EDCI and its next steps. Their big question is: how committed are LPs to EDCI?

Before investing too much time into EDCI, GPs want to know: how does this data help us? Will more indicators be added to EDCI? Will this data help us raise money in the future? Will EDCI advise their GPs on what technology tools to use to better report this data? At the moment, GPs are being exposed to large data sets and much of this complicated reporting is handled manually.

Moving forward

Only time will be able to answer these questions sufficiently as the initiative unfolds. As EDCI gathers a critical mass of data for benchmarking, LPs will finally be able to compare apples to apples in an area that has heretofore been characterized by fractured data and unreliable ESG ratings.

Fortunately, the EDCI framework deliberately draws from existing ESG standards to minimize the reporting burden on GPs to the extent possible. By prioritizing metrics that investors and LPs are already asking for, these metrics should become standardized and drive disclosure convergence in the industry to lessen the reporting burden in the long run.

ESG reporting tools

While GPs are used to disclosing financial data, reporting non-financial data is still a relatively new practice, one that is increasingly difficult to tackle manually, especially considering differing LP requirements. We strongly advise private equity firms to partner with cloud-based, customizable platforms to meet and map all their data requirements in one place without having to devote inordinate amounts of time and manpower to the process.

ESGTree provides best–in-class ESG data management solutions geared towards private investors. Built around customizable metrics and user experiences, our ESG reporting tools are purpose made for both seasoned ESG managers and those entering the world of ESG for the first time. We strongly believe that ESG can and should be made a value creation endeavor rather than a reporting burden.

Click here to learn more about ESGTree’s ESG Data Management & Reporting Software for Financial Institutions

ESG Is Here to Stay!

ESG Is Here to Stay!

By 2025, ESG assets are estimated to exceed USD$50 trillion. In other words, one third of Assets Under Management (AUM) will be classified as ESG assets in the next three…
Read more

Summary

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What is the EDCI?

Why is EDCI significant?

Three key learnings automating the EDCI framework

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ESG & Impact – A Natural Fit for Credit Unions

ESG & Impact – A Natural Fit for Credit Unions

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When it comes to ESG & Impact Investing, credit unions are well-positioned to use both to differentiate themselves from other financial institutions. By providing innovative product opportunities for existing members and attracting new members that are seeking to integrate social considerations in investment decisions, credit unions can easily strengthen the link to their mission & spearhead the mainstreaming of Impact Investing and, to a larger extent, ESG.

An ESG Approach for Credit Unions

Today, ESG has progressed from a nice-to-have investment class “fad” to a front-page headline of a must-have sustainable investment process – one that consciously and conscientiously thinks about a company’s long-term impact on the environment & society as much as the organization’s business performance. These principles of social responsibility, financial inclusion, and community commitment are, in fact, reflected in credit unions’ missions, strategies, and product offerings, making ESG a natural and seamless fit for these cooperative, member-owned financial institutions.

An ESG approach means credit unions explicitly consider both environmental risk mitigation and ways to maximize environment/climate-related opportunities in their strategies, planning, and metrics. Unsurprisingly, the opportunities for credit unions around adopting an ESG approach are vast:

  1. Regulatory Preparedness: The U.S. may eventually follow the European Union’s lead in having additional ESG information incorporated into SEC reporting requirements. If the SEC follows through, federal and state credit union regulators will not be far behind, and it is better for credit unions to be prepared and possibly help to form any future regulations.
  2. Proactive Environmental Risk Mitigation: Credit unions are well aware of environmental and climate risks. In fact, they are often among the first responders for their members, staff, and communities when natural disasters and weather events Nevertheless, their reactive approach to environmental hurdles lacks a long-term, sustainable motive; herein lies the credit unions’ opportunity to consciously integrate ESG into their planning, operations, and strategy via a proactive approach. This could look like 1) expanding their portfolio of green lending products, 2) supporting “cleantech” through purchasing decisions and business development, and/or 3) adopting policies in lending, investing and education that support sustainability within the communities where the credit unions operate. This proactive approach would enable credit unions to mitigate the losses and the impact on their balance sheets more effectively as well as reduce the stress and injury to employees, members, and the community.
  3. Sustainable Financial Growth & ESG KPIs: Credit unions’ innate proclivity toward ESG factors offers them the opportunity to effortlessly create appropriate and quantifiable ESG-dashboard measures that can serve as meaningful Key Performance Indicators (KPIs) to senior management. Institutionalizing ESG in this way lends a more structured and defined way of driving sustainable financial growth, which is opportunely the credit union ethos. Sound performance on ESG-related measures translates into better financial returns, so a concerted consideration of ESG factors in a credit unions planning & operations will offer immeasurable success and sustainable growth for the business and stakeholders alike.
  4. An Ideological Shift in the Values of Millennials & Gen Zs: Considering how most Millennials and Gen Zers are now gravitating toward banks and credit unions that care for more than just their bottom line, credit unions that embrace existing opportunities around ESG will benefit from a burnished brand, better talent, enhanced board function, and increased ability to serve their members and stakeholders.

It is evident that credit unions are in the perfect space to adopt ESG guidelines that will accurately and transparently benchmark, measure, and evaluate their ESG performance. There are many tools and platforms out there today that consolidate these guidelines and present them in a digestible manner; ESGTree is one such platform that takes data consolidation & trends analysis to the next level by offering a one-stop-cloud-based solution that collects, analyzes, and reports ESG data seamlessly. This solution may come in handy for credit unions, who very well know that sound performance on ESG-related measures translates into better financial returns.

Impact Investing & Credit Unions

Despite credit unions’ ethos around community, sustainability, and inclusion, many treat Corporate Social Responsibility (CSR) as a tactical secondary activity; nearly 20% of credit unions provide no focus area for corporate giving and, generally, report being less than satisfied with their Impact report tracking record. If credit unions made a concerted effort to formalize the ESG opportunities outlined above and conjoined it with defined Impact Initiatives, they could become the quintessence of sustainable finance.

Specifically, credit unions have an opportunity to lead the development of the retail impact investment market in ways that other financial institutions do not. Like with ESG, the prospects here for credit unions are immeasurable:

The Supply-Demand Gap: The Rockefeller Foundation’s survey (2019) found a “significant appetite” for Impact Investing from Retail Investors. Unfortunately, the sector has been slow to respond with suitable products and for this very reason, credit unions have ample room to introduce innovative Impact Initiatives/Products that can bridge this market gap and place them at the forefront of values-based investing.

Competitive Advantage: Research conducted by the Global Alliance for Banking on Values suggests that financial institutions that base their decisions for the greater good, individuals and society, as opposed to the maximization of profits, are outperforming their competitors in areas such as return on assets, growth in loans and deposits, and capital strength. By making social finance a core part of their business model (which would include offering impact-driven products for individual members), credit unions will have an advantage over competitors.

Appeal to Millennials: As mentioned in the Section above, Millennials & Gen Zers have brought an ideological shift in the investment & consumer decision-making process. Millennials in particular are the second-most active generation engaged in impact investing and a majority of them believe that impact investing can fix a financial system that is inherently balanced or unequal, highlighting a motivation to improve the system from within. Again, this market readiness for Impact Initiatives & retail Impact products such as fixed income community notes, listed investment trusts, impact mutual funds, shows just how favorable the environment is for credit unions to take the lead.

An Immature but Rapidly Developing Market: Unlike ESG, Impact Investing is a relatively immature but rapidly developing market. Over the years, it has become much more sophisticated since funds in this asset class have started to develop more meaningful ways to measure their outcomes. In this new and immature market, credit unions can start and expand Impact Initiatives/Products at any scale. For instance, with gas prices rising and the auto market hindered by ongoing supply-chain issues, credit unions have the early opportunity to place a new focus on electric vehicles (EV). They can devise marketing to ensure consumers of modest means can afford EVs, while also opening the market for other green products, including solar panels, electric bikes, and more.

 

Despite the significant appetite for Impact Investing, there are daunting barriers to greater adoption. One is the lack of standardisation in measuring the ‘impact’ of investments. Investors are struggling to quantify the environmental impact of their investments – 61% of them state that this cause is difficult to measure because of the vast array of impacts and a lack of commonality. 

Currently, the 17 Sustainable Development Goals (SDGs)  are the most commonly used impact performance measurement tools, where investors assign impact to one or more of the goals, such as climate action or gender equality. This Tool has been synthesized and automatized by ESGTree, whose Platform contains an Impact Measurement feature that has improved and refined the way that capital is allocated, and returns are measured.

As solutions like ESGTree lower the obstacles to the adoption of ESG & Impact, credit unions can seamlessly use ESG & Impact to deepen financial well-being for all and advance the communities they serve – the opportunities here are endless.

Click here to learn more about ESGTree’s ESG Data Management & Reporting Software for Financial Institutions

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Who Should the Economy Really Serve?

The rallying cry of the American Revolution – no taxation without representation – is today taken as self-evident but deserves a re-examination in light of the climate crisis and sustainable…
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Summary

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How is ESG relevant to Credit Unions?

How is impact Investing relevant to Credit Unions?

How can Credit Unions integrate ESG and Impact Investing?

Contact Us

Contact Us

Email

[email protected]

Office Addresses

Canada: ESGTree, CPA 4th Floor, 140 West mount Rd N, Waterloo,
ON N2L 3G6, Canada

United Kingdom: ESGTree, 33 Queen Street, London EC4R 1AP, United Kingdom

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ESGTREE

The Greenhouse Gas Protocol & its Scope 1, 2 & 3 Emissions Classification Explained

The Greenhouse Gas Protocol & its Scope 1, 2 & 3 Emissions Classification Explained

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The International Sustainability Standards Board (ISSB) announced recently that it would mandate the reporting of Scope 3 greenhouse gas (GHG) emissions – or emissions resulting from a company’s supply chain – as part of its ESG disclosure standards currently under development. Given how tricky such emissions can be to assess, the move signals the criticality of carbon footprint reporting to both investors and regulators. The ruling was unanimous. 

The ISSB is an independent, private sector body falling under the International Financial Reporting Standards (IFRS) Foundation. It was born of the much-publicized COP26 climate summit held in Glasgow last year. Its mandate is to create a unified, global set of baseline sustainability reporting standards to help investors understand the sustainability profiles of companies and their related risks and opportunities. 

The ISSB’s decision echoes other regulatory moves in 2022, such as the US Securities and Exchange Commission’s proposal to mandate climate disclosures, or the historic passing of the Inflation Reduction Act, set to spend over $70 billion on reducing carbon emissions across all sectors of the US economy. And lest we forget, national commitments to hit net zero by 2050 are only 28 years away. 

To appreciate the central role of carbon emissions reporting in sustainability and environmental regulation, we explain the meaning of Scope 1, 2 and 3 GHG emissions and their associated implications. 

What is the Greenhouse Gas Protocol?

Legal experts predict that the SEC will take until the end of 2022 to finalize and publish a rule, in some form, on mandatory climate disclosures. However, they say, this rule will almost certainly face legal challenges. In particular, experts believe the SEC will face claims that the rule is an overreach of its regulatory authority. Other contentions include the belief that mandatory reporting places an undue burden on companies and might hurt financial returns. 

The protocol provides guidelines for reporting on the emissions of the seven greenhouse gases listed under the Kyoto Protocol: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride and nitrogen trifluoride. Of these, carbon dioxide is by far the most emitted greenhouse gas as a result of human activity. 

What are scope 1, 2 and 3 carbon emissions?

The GHG Protocol classifies the reporting of emissions into three main categories:

Scope 1 (direct emissions): GHG emissions produced by operations that are directly controlled or owned by the reporting company. 

Scope 1 emissions are further divided into four classes:

  • stationary combustion: emissions resulting from the combustion of fossil fuels e.g., boilers for heating
  • mobile combustion: emissions resulting from burning fuel for company owned or used vehicles 
  • fugitive emissions: accidental emission leaks e.g., gas leaks from refrigerators or air conditioners
  • process emissions: emissions resulting from industrial and on-site manufacturing processes

Scope 2 (indirect emissions): GHG emissions produced indirectly from the reporting company’s outside purchase of necessities such as electricity, heating or cooling. 

Scope 3 (indirect emissions outside company purview): Indirect GHG emissions resulting from the supply chain of the reporting company. 

Scope 3 emissions are difficult to assess because they do not fall under company control. So much so that the ISSB will provide what it calls “relief provisions” to help businesses comply with its frameworks’ mandated Scope 3 reporting requirement. 

Scope 3 emissions are divided into no less than 15 categories and include emissions resulting from business travel, employee commuting, wastewater treatment, landfill waste, transportation and distribution of goods, and investments (see below), among other considerations. 

What are financed emissions?

In addition to Scope 1, 2, and 3 emissions, investors should be aware of their financed emissions. Financed emissions are those emissions generated by the loans and investments of any financial institution such as a bank or investment firm. Accounting for financed emissions allows organizations to better asses sustainability-related risks and opportunities associated with their investments. 

To do this, the Partnership for Carbon Accounting Financials (PCAF) was launched in 2019. Conceived by financial institutions, this industry-led framework condenses and standardizes the collection, assessment and reporting of financed emissions. 

ESGTree’s automation of the PCAF framework simplifies this process by allowing companies to input basic activity related information to calculate their carbon emissions across all scopes while providing investors with figures and analytics for financed emissions of their portfolio. ESGTree is currently working with Canadian banks to automate their PCAF data collection, analysis, and reporting.

ESGTree helps private capital investors automate ESG data collection and analysis for their portfolio companies. Our platform features include our carbon calculator, customizable and automated ESG frameworks, multi-level report viewing, trends analysis dashboard, and other features aimed to make ESG work for everyone.

Click here to learn more about ESGTree’s ESG Data Management & Reporting Software for Financial Institutions

Who Should the Economy Really Serve?

Who Should the Economy Really Serve?

The rallying cry of the American Revolution – no taxation without representation – is today taken as self-evident but deserves a re-examination in light of the climate crisis and sustainable…
Read more

Summary

Share:

What is ISSB?

What is the Greenhouse Gas Protocol?

What are Scope 1, 2 and 3 emissions?

What are financed emissions?

How can Banks leverage ESGTree to automate their PCAF commitments?

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ESGTREE

TCFD Reporting: Software Solutions for Financial Institutions

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TCFD Reporting: Software Solutions for Financial Institutions

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A Global Shift Towards TCFD

In 2017, the Task Force on Climate-related Financial Disclosures (TCFD) introduced a framework to help organizations report their climate-related financial information and assess climate risks and opportunities.    

Today, the TCFD is one of the most commonly used disclosure frameworks across the globe, with countries such as the UK and New Zealand among the first to require TCFD-aligned climate reporting. In fact, the TCFD is now set to move into the administration of the International Sustainability Standards Board (ISSB), a merger that is expected to bring further cohesion among the plethora of sustainability standards and frameworks available for asset managers. Thankfully in the past six years, financial institutions have recognized that climate risks are intertwined with financial risks, motivating them to drive emissions down. 

The Four Pillars of the TCFD

The framework itself consists of 11 disclosure recommendations spanning four interrelated thematic areas: governance, strategy, risk management, and metrics and targets. Apart from the last area, these recommendations are largely qualitative in nature and can be summarized as follows:  

  • Governance: companies should disclose their management and board’s strategy for monitoring and assessing climate risk (and opportunity).  
  • Strategy:  companies should identify climate risks and opportunities foreseen over the short, medium and long term; explain the impact of these risks and opportunities on their planning and operations; and assess how resilient their strategy is in various climate-related scenarios (i.e., climate stress tests).  
  • Risk Management:  companies should explain their process for identifying and managing climate risk and how this process fits into the overall picture of risk management.  
  • Metrics and Targets: companies should disclose the specific metrics used to inform their climate strategies, including the disclosure of scope 1, 2, and 3 greenhouse gas (GHG) emissions among other conventional metrics. They should also disclose climate goals or targets and their progress towards them.  

TCFD Reporting Made Easier with Software Solutions

Reporting GHG Emissions: A Novel Requirement 

Measuring and disclosing financed emissions (i.e., GHG emissions associated with loans and investments) as part of climate disclosures is a new deliverable for many organizations/ financial institutions and, as such, will require new routines, organizational structures, and processes for gathering data.  

All this takes time and resources – the learning curve is steep and for some companies these changes need to be implemented in time for the 2024 reporting year. A lot of the times, organizations estimate their climate figures by buying data from providers such as MSCI, S&P, & Sustainalytics to fulfil their climate disclosure requirements – unfortunately, financial institutions cannot do this for their private markets portfolios. This is primarily because their investing and lending data needs to be collected first-hand from the portfolio, which can only be done with the help of customized tools, automations, and individuals with industry expertise. For these reasons, financial institutions, on the private markets side, end up seeking the expertise of external consultants and Software solutions that can ease the reporting burden by seamlessly collecting climate data that tracks the full extent of their carbon footprint. 

Partnering with a SaaS platform on ESG automation can help:

– Streamline collection of large sets of climate data  
– Calculate emissions with easily available activity data 
– Generate automated TCFD Assessments  

A Deep Dive into ESGTree’s TCFD Reporting Software for Private Equity

ESGTree is purpose-built for financial institutions and private equity firms. We offer a full suite of features for your TCFD reporting needs: 

ESGTree’s TCFD Tool Features 

Description 

Automatic TCFD report generation 

Upon completing 40 multiple-choice questions, our platform automatically generates your TCFD report – automate the difficult legwork and eliminate the need for external consultants. 

Climate Strategy Expertise 

We leverage advanced analytics and automate major ESG and climate disclosure frameworks to deliver timely, independent, and decision-useful insights.  

Quality & Clear Climate Maturity Assessment 

We  assess an organization’s climate maturity, considering both the clarity (breadth of coverage) and quality (depth of actions) of its climate performance against TCFD recommendations. Our platform provides recommendations and action items to improve climate performance vis-a-vis the four pillars of the TCFD framework.  

Data-Driven Market Intelligence 

Benchmark your climate progress against a data set of 10,000+ companies. 

Proprietary Carbon Calculator & Portfolio Company Scorecards 

Our Carbon Calculator allows for seamless calculation of carbon emissions by taking in data that companies readily have on hand to provide figures for Scope 1, 2, and 3 emissions on the spot.    

Trends, Analysis and Visualizations  

We offer trends analysis and visualizations by ESG framework, indicator and reporting period. 

Add-on Advisory Services for ESG policy creation, strategy road-mapping, training, and reporting 

Our Client Success Team is comprised of experts in Climate, ESG and impact investing who advise our clients on strategy and provide support on every step of the ESG journey.  

Free client success support from ESGTree experts 

A Deep Dive into ESGTree’s TCFD Reporting Solution for Private Equity ​

Given the international buy-in and legislative action around TCFD, we strongly advise adding the TCFD framework to your climate action plan. By acting now, you can stay ahead of the regulatory curve and minimize transition risk as the world moves towards a lower carbon economy.  

With ESGTree, save the time and cost of ESG reporting by harnessing the power of the cloud and streamlining ESG data collection, analysis and disclosure.  

For more information on the TCFD Reporting Solution, please contact us at :

[email protected]

 or 

Click here to book a demo.

ESGTree helps private capital investors automate ESG data collection and analysis for their portfolio companies. Our platform features include our carbon calculator, customizable and automated ESG frameworks, multi-level report viewing, trends analysis dashboard, and other features aimed to make ESG work for everyone.

Click here to learn more about ESGTree’s ESG Data Management & Reporting Software for Financial Institutions

#ESGTree #TCFDReporting #SustainableFinance #ClimateResilience #FinancialInstitutions #PrivateEquity #VentureCapital

Who Should the Economy Really Serve?

Who Should the Economy Really Serve?

The rallying cry of the American Revolution – no taxation without representation – is today taken as self-evident but deserves a re-examination in light of the climate crisis and sustainable…
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A Global Shift Towards TCFD ​

The Four Pillars of the TCFD

TCFD Reporting Made Easier with SaaS Solutions

Automate TCFD with ESGTree's TCFD Software

A Deep Dive into ESGTree’s TCFD Reporting Solution for Private Equity

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Office Addresses

Canada: ESGTree, CPA 4th Floor, 140 West mount Rd N, Waterloo,
ON N2L 3G6, Canada

United Kingdom: ESGTree, 33 Queen Street, London EC4R 1AP, United Kingdom

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Canada Federal Budget 2023: Clean Energy Highlights

Canada Federal Budget 2023: Clean Energy Highlights

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Canada’s release of its 2023 federal Budget: A Made-In-Canada Plan, comes at a pivotal moment in global commitments to a clean energy transition. From President Biden’s historic signing of the Inflation Reduction Act south of the border (85% of which focuses on climate), to robust sustainable finance and greenwashing-busting legislation in Europe, Canada too includes various investments in and tax credits for clean technology in its new budget.

The federal budget targets three priority areas: healthcare, affordability for everyday citizens, and the clean economy transition. It proposes $43 billion in net new spending over the course of six years, slightly raising the country’s debt-to-GDP ratio for the next two. Current federal debt is at $1.18 trillion.

Budget 2023: Clean Economy

The 2023 budget provisions for a clean economy cover the following areas:

  • Clean energy and electrification (e.g., support for innovating the electricity grid)
  • Clean manufacturing
  • Greenhouse gas emissions reduction
  • Electric vehicles and batteries
  • Infrastructure
  • Critical minerals
  • Support for other major projects

A combination of financing, tax credits, pollution pricing and regulatory frameworks, and targeted funds aims to tackle these areas. In particular, it will provide:

  •   $20.9 billion in tax credits over six years, including:

o   The Clean Electricity Tax Credit ($6.3 billion over four years)

o   The Clean Hydrogen Investment Tax Credit ($5.6 billion over five years)

o   The Clean Technology Manufacturing Tax Credit (about $4.5 billion over five year)

o   An expansion of the Carbon Capture, Utilization, and Storage Investment Tax Credit (expect to cost $520 million over five years)

  •   At least a $20 billion investment in clean power and clean infrastructure by the Canada Infrastructure Bank
  •   $30 billion over 13 years to Natural Resources Canada to fund smart grid and smart renewables programs
  •   $1.5 billion to the Critical Minerals Infrastructure Fund towards energy and transportation projects to unlock priority mineral deposits
  •   $500 million over 10 years to the Strategic Innovation Fund to support the development of clean technologies
  •   Reduced corporate tax rates for companies manufacturing zero-emissions technology

Canadian and US clean economies

Over USD$100 trillion of private capital is expected to be invested towards building clean economies between now and 2050, according to the Canadian government. “Canada is currently competing with the United States, the European Union and countries around the world for our share of this investment,” it said.

Moreover, with the Inflation Reduction Act, the “sheer scale of US incentives will undermine Canada’s ability to attract the investments needed to establish Canada as a leader in the growing and highly competitive global clean economy. If Canada does not keep pace, we will be left behind,” the government continued.

That said, given how the economies of the two countries are inextricably linked, Canada also stands to benefit from the legislation, especially its energy and mining sectors. For example, US investment in clean manufacturing technology will require a steady supply chain of critical minerals, which Canada possesses.

The clean energy transition and ESG

Critical to the transition to a clean economy is regulatory oversight over funds and investments claiming to be “green,” reducing greenhouse gas emissions, and allowing investors to compare the sustainability risk profile of companies. To start, Canada has mandated that all Crown corporations disclose their climate data in line with the Task Force on Climate-Related Financial Disclosures (TCFD) framework starting in 2024. Moreover, the US Securities and Exchange Commission (SEC) is on the brink of releasing a rule similarly mandating US public companies to disclose their climate data in-line with TCFD recommendations. Given the global buy-in, both in North America and Europe, of regulated climate disclosures, ESG reporting will continue to grow as an integral oversight tool of a greener economy – in public and private markets alike. 

Integrating ESG into financial institutions

In order to implement some of the budget’s key provisions, the Budget Implementation Act (Bill-C47) is currently being debated in Parliament. Its provisions include enhanced corporate governance oversight and DEI disclosures for Federally Regulated Financial Institutions (FRFI). In addition to targeting financial crimes, the proposal would also require some measure of public disclosure on the representation of women and minorities among senior management positions. 

While these provisions target FRFIs, ESGTree advises that other financial players, including private equity and venture capital firms, stay ahead of the regulatory curve by embedding ESG principles into their operations as well as into all stages of the investment lifecycle. Moreover, given the budget’s strong focus on reducing greenhouse gas emissions and moving towards a more sustainable economy, financial institutions would do well to consider not only their emissions but those resulting from the supply chain, prioritizing those suppliers with strong ESG credentials. One reporting tool is The Partnership for Carbon Accounting Financials (PCAF),  a global partnership of financial institutions that aims to standardize the data collection, assessment and reporting of greenhouse gas emissions associated with their loans and investments i.e., their financed emissions. The PCAF standard is ideal to implement because it comes from within the industry itself.

Canada’s budget illustrates that, in addition to the importance of centering sustainable economic policies, the green transition will be a highly competitive process, opening avenues of significant investment. In this new environment, the organizations that thrive will treat ESG as a critical pillar of value creation. 

About ESGTree

ESGTree’s platform not only collects and analyzes ESG data in the cloud, but also automates ESG frameworks like PCAF, generating reports, recommendations, and portfolio benchmarking against a dataset of 10,000+ companies. Moreover, tools like our Carbon Calculator allow companies to both calculate and monitor their greenhouse gas emissions with information readily available on hand, cutting out the need for consultants. 

ESGTree helps private capital investors stay ahead of regulation and easily collect, analyze and report their ESG data by harnessing the power of the cloud.

Click here to learn more about ESGTree’s data management and reporting software for private capital investors. 

Who Should the Economy Really Serve?

Who Should the Economy Really Serve?

The rallying cry of the American Revolution – no taxation without representation – is today taken as self-evident but deserves a re-examination in light of the climate crisis and sustainable…
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What are the clean economy provisions of the federal Budget 2023: A Made-In-Canada Plan?

How does the Inflation Reduction Act affect Canada’s clean economy transition?

How can Canada benefit from the Inflation Reduction Act?

Where does ESG fit into the clean energy transition?

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Contact Us

Email

[email protected]

Office Addresses

Canada: ESGTree, CPA 4th Floor, 140 West mount Rd N, Waterloo,
ON N2L 3G6, Canada

United Kingdom: ESGTree, 33 Queen Street, London EC4R 1AP, United Kingdom

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The Inflation Reduction Act of 2022:  A Summary of its Climate and Energy-Related Provisions

The Inflation Reduction Act of 2022: A Summary of its Climate and Energy-Related Provisions

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Signing the 730-page Inflation Reduction Act into law last month was by no means inevitable. 

The bill passed muster in the United States Senate only by the slimmest of margins, itself a pared down version of what was originally envisioned as a $2 trillion dollar climate spending law. Nevertheless, the US climate bill, as it is colloquially known (about 85% of it focuses on climate), has been heralded as a genuine gamechanger, described as both “sweeping” and “historic” in most media commentary. 

In a nutshell, the Inflation Reduction Act is a $737 billion law focusing on healthcare, taxes and the environment. It aims to lower drug prices for American consumers, increase corporate tax, and provide $369 billion in spending on clean energy, environmental justice initiatives, and cutting greenhouse gas emissions – potentially by 40% below 2005 levels by decade’s end, according to some estimates. 

The bill has also faced some criticism from environmental groups over certain concessions to the fossil fuel industry. It links renewable energy and fossil fuels together by prohibiting the leasing of land for wind and solar projects without first leasing land for oil and gas ones. It also guarantees drilling opportunities in Alaska and the Gulf of Mexico (the Biden administration had previously curtailed offshore drilling). 

To understand the scope of this massive bill, a summary of key climate and clean energy-related clauses pertaining to industry and economy is provided below. * 

Reducing Carbon Emissions

The bill focuses on reducing carbon output across all sectors of the American economy by providing:

  • $30 billion in grants and loans for states and utilities companies to accelerate their transition to clean energy
  • $27 billion towards accelerating the deployment of clean technologies
  • $9 billion for federal procurement of domestically produced clean technologies  
  • $6 billion towards reducing emissions in the industrial manufacturing sector 
  • Tax credits for the usage of clean energy sources and their storage, for clean fuels and clean commercial vehicles, and for reduction of emissions from industrial manufacturing
  • A Methane Reduction Programme to reduce leaks from natural gas production and distribution

The protocol provides guidelines for reporting on the emissions of the seven greenhouse gases listed under the Kyoto Protocol: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride and nitrogen trifluoride. Of these, carbon dioxide is by far the most emitted greenhouse gas as a result of human activity. 

Clean Energy Transition

The bill devotes $60 billion to support domestic renewable energy manufacture across the supply chain. Provisions include:

  • $30 billion in tax credits to support the manufacture of solar panels, wind turbines, batteries, and the processing of minerals critical for such purposes
  • $20 billion in loans to build country-wide clean vehicle manufacturing facilities
  • $10 billion in investment tax credit to build clean energy manufacturing facilities (e.g., factories making electric vehicles or solar panels)
  • $2 billion in grants to retool auto manufacturing facilities to equip them to build clean vehicles 
  • $2 billion towards national energy research
  • $500 million towards the Defense Production Act for heat pumps and processing of critical minerals 

Environmental Justice and Supporting Rural Communities

The bill will spend $60 billion on initiatives supporting those disproportionately affected by climate change. Key initiatives include:

  • $3 billion in grants to community-led projects addressing climate-change related public health issues (e.g., communities disproportionately affected by pollution)
  • $3 billion towards reducing air pollution at ports by procuring zero-emissions technology
  • $3billion to support neighbourhood safety, equity and accessibility programs
  • $1 billion to buy clean heavy-duty vehicles such as school buses and garbage trucks

In addition to the $60 billion, further funding is allocated towards developing clean energy in rural communities and protecting the natural environment. This includes:

  • $20 billion (roughly) to bolster sustainable agricultural practices
  • $5 billion for forest conservation efforts
  • $4 billion to combat drought in the nation’s west
  • $2.6 billion for coastal habitat restoration efforts
  • Grants and tax credits to support the production of biofuels

To do this, the Partnership for Carbon Accounting Financials (PCAF) was launched in 2019. Conceived by financial institutions, this industry-led framework condenses and standardizes the collection, assessment and reporting of financed emissions. 

ESGTree’s automation of the PCAF framework simplifies this process by allowing companies to input basic activity related information to calculate their carbon emissions across all scopes while providing investors with figures and analytics for financed emissions of their portfolio. ESGTree is currently working with Canadian banks to automate their PCAF data collection, analysis, and reporting.

Fossil Fuels

The Inflation Reduction Act also contains provisions on the fossil fuel industry that both support and constrain it. These include:

  • Federal lands and offshore waters cannot be leased for renewable energy projects without also providing space for fossil fuel projects
  • Funding is provided to the industry to monitor air pollution 
  • Incentives are provided to install carbon capture and efficiency-related solutions
  • Fees are imposed for natural gas extraction and methane leaks

Who might benefit the most from the Inflation Reduction Act?

Industries that look to benefit from the climate bill include renewable energy, electric vehicles, and mineral/lithium extraction (e.g., for batteries). 

Canada’s energy and mining sectors also look to benefit. Canada may also be incentivized to play “climate catch up” with the US, which formerly seemed to lag behind on global efforts to combat climate change and bolster greener economies. 

The Climate Bill and ESG Reporting

Given the millions of dollars of investment into the green energy transition, one wonders what mechanisms for accountability could be put in place for companies involved in this transition. One answer might be the US Securities and Exchange Commission (SEC) proposal to mandate climate reporting for public companies, aligned with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. 

An aspect of both the climate bill, as well as TCFD reporting, is attention to greenhouse gas emissions. This means both investors and organizations must be able to collect and analyze hard data around emissions and other metrics and targets – and strategize around it. Tools that streamline and simplify this process, such as ESGTree Carbon Calculator, will become increasingly necessary as ESG regulation continues to solidify around the world.  

While the Inflation Reduction Act is indeed a huge victory in the effort to ‘green’ the American economy, it does not exist in a vacuum. While not an ESG bill per se, it certainly compliments global efforts to enhance and standardize ESG compliance. 

ESGTree provides powerful data solutions to help private equity (PE) and venture capital (VC) firms gather, collect, analyze, benchmark and report their ESG data and that of their portfolio companies. Our carbon calculator, customizable and automated ESG frameworks, multi-level report viewing, trends analysis dashboard, and other features aim to make ESG a value creation tool rather than a reporting burden. 

Click here to learn more about ESGTree’s ESG Data Management & Reporting Software for Financial Institutions

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What is ISSB?

What is the Greenhouse Gas Protocol?

What are Scope 1, 2 and 3 emissions?

What are financed emissions?

How can Banks leverage ESGTree to automate their PCAF commitments?

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A Brief Overview of the US SEC’s Proposal to Mandate Climate Disclosures

A Brief Overview of the US SEC's Proposal
to Mandate Climate Disclosures

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In March 2022, the United States Securities and Exchange Commission (SEC) proposed that all publicly listed US companies be mandated to report their climate data in alignment with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. 

When the proposal was then opened for public comment and feedback, the SEC received over 3,400 letters – significantly more than it customarily does when seeking public input. Responses came from small businesses, large corporations, trade organizations, investors, auditors, academics and individual citizens. The proposal has received both endorsement and criticism from business leaders, government representatives and the media.

What timeline can we expect on the implementation of this proposal?

Legal experts predict that the SEC will take until the end of 2022 to finalize and publish a rule, in some form, on mandatory climate disclosures. However, they say, this rule will almost certainly face legal challenges. In particular, experts believe the SEC will face claims that the rule is an overreach of its regulatory authority. Other contentions include the belief that mandatory reporting places an undue burden on companies and might hurt financial returns. 

How do US companies currently disclose climate data?

So far, companies rely on guidance based on a 1976 Supreme Court decision. This guidance focuses on materiality i.e., those considerations likely to affect financial performance and are key to a business’s goals, decision-making and impact. It also grants much discretion to companies on how to undertake this reporting. 

Reporting data in-line with TCFD would be quite a departure from solely materiality-focused reporting. In addition to reporting scope 1, 2 and 3 emissions, companies would also have to report the potential impact of climate risk on their business, strategy and future health.

The four pillars of TCFD

TCFD recommendations are largely qualitative in nature and can be summarized as follows: 

Governance: Companies should disclose their management and board’s strategy for monitoring and assessing climate risk (and opportunity). 

Strategy: Companies should identify climate risks and opportunities foreseen over the short, medium and long term; explain the impact of these risks and opportunities on their planning and operations; and assess how resilient their strategy is in various climate-related scenarios (i.e., climate stress tests). 

Risk Management: Companies should explain their process for identifying and managing climate risk and how this process fits into the overall picture of risk management. 

Metrics and Targets: Companies should disclose the specific metrics used to inform their climate strategies, including the disclosure of scope 1, 2, and 3 greenhouse gas emissions among other conventional metrics. They should also disclose climate goals or targets and their progress towards reaching them. 

Support and backlash to the proposal

Prominent business leaders supporting the SEC’s proposal include BlackRock CEO Larry Fink and Brookfield Asset Management’s Mark Carney. Moreover, the proposal has come in the middle of a global push for ESG regulation (shortly preceding the historic passing of the Inflation Reduction Act). 

On the other hand, ESG in general has gotten caught up in America’s culture wars. This proposal has been viewed in some quarters as part of a greater push for liberal agendas. Certain Republican state governors (e.g., those of Florida, Texas and West Virginia) believe the SEC is overstepping its legal role of regulating the trade, marketing and issuance of securities (which includes for private markets) for the protection of investors. 

Florida, in particular, has banned taking ESG considerations into account when making investments on behalf of its state pension plan.

Relief to investors

The World Economic Forum has predicted that half of the top 10 risks over the next decade are related to climate. This proposal, if enacted, would be hugely beneficial to investors who can then compare the risk profiles of potential investments in a transparent and standardized manner. 

What would the SEC proposal mean for businesses?

Businesses would require greater internal or even external resources to implement TCFD, considering the potential exposure to legal risk and investor confusion should reporting not be undertaken carefully and thoroughly. 

That said, climate and ESG reporting can – and should – be approached as a value creation exercise rather than a reporting burden. To simplify the TCFD reporting process, ESGTree’s cloud-based platform boils down the reporting process to 40 simple multiple choice questions that, upon completion, automatically generate the TCFD report, thereby automating much of the difficult legwork. Based on the responses to the questions, ESGTree is able to provide recommendations and action items on how to improve a company’s climate performance vis-a-vis the four pillars of the framework. ESGTree’s complementary Carbon Calculator allows for the seamless calculation of carbon emissions by taking in data that companies easily have on hand and providing figures for their Scope 1, 2 and 3 emissions instantaneously. 

The global regulatory context and the way forward

The SEC proposal doesn’t exist in a vacuum. Other TCFD-aligned laws or proposals include:

  • Mandatory TCFD-aligned reporting in the United Kingdom for 2022 onwards
  • Mandatory TCFD-aligned reporting for Crown corporations in Canada from 2024 onwards
  • Japan, New Zealand, Brazil, Singapore and Switzerland aim to have some kind of TCFD-aligned reporting by various timelines

Given international support for TCFD, it is advisable to add this reporting to climate action plans now rather than later to anticipate future regulatory changes and reduce transition risk as the world moves towards a greener economy. 

ESGTree helps private capital investors automate ESG data collection and analysis for their portfolio companies. Our platform features include our carbon calculator, customizable and automated ESG frameworks, multi-level report viewing, trends analysis dashboard, and other features aimed to make ESG work for everyone.

Click here to learn more about ESGTree’s ESG Data Management & Reporting Software for Financial Institutions

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What can we expect from the SEC’s proposal?

Who supports and opposes this proposal?

How do US companies currently disclose climate data?

What are the four pillars of TCFD?

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ESGTree Elevates Financial Institutions’ Climate Resilience with TCFD Reporting SaaS Solution

TCFD_Reporting_Saas_FInancial_Institutions

ESGTree Elevates Financial Institutions’ Climate Resilience with TCFD Reporting SaaS Solution

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[Waterloo] – 11/09/23 – ESGTree, a pioneer in ESG solutions, is proud to introduce its TCFD Reporting Solution, revolutionizing the way financial institutions approach climate disclosures and regulation. By providing a simplified, actionable approach to sustainability reporting, ESGTree empowers organizations to position themselves strategically for fundraising, compliance, innovation and success.

This latest innovation comes at a time when regulators are clamping down on sustainability reporting, investors are demanding robust ESG strategies, and assessing climate risk and opportunity is critical to economic growth and resiliency. Central to these concerns is the Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD reporting framework is recognized for its central role in defining climate reporting worldwide, with its architecture guiding the development of the highly anticipated standards recently released by the International Sustainability Standards Board (ISSB).

A Core Tool for Financial Resilience

ESGTree’s TCFD Reporting Solution leverages a user-friendly multiple-choice questionnaire to generate automatic, comprehensive TCFD assessments, supported by actionable recommendations and sustainability scorecards for portfolio companies. This streamlined approach allows users to assess their current sustainability profile, and identify areas of improvement across TCFD’s four pillars: Governance, Risk Management, Strategy, and Metrics and Targets. Critically, it expedites the reporting process and eliminates the need for hiring external consultants.

“Our aim is to revolutionize the way financial institutions approach climate-related disclosures,” explains Shahzeb Irshad, Vice President of Platform & Partnerships at ESGTree. “We’ve designed our solution to simplify the disclosure process while delivering tailored recommendations, enabling organizations to address climate risks and opportunities efficiently.”

Reporting GHG Emissions: A Novel Requirement

Although the TCFD is the gold standard for climate disclosures, the intricacies of TCFD reporting pose a significant challenge to financial institutions. Measuring and disclosing financed emissions (i.e., GHG emissions associated with loans and investments) as part of climate disclosures is a new deliverable for many organizations/ financial institutions and, as such, will require new routines, organizational structures, and processes for gathering data.  All this takes time and resources – the learning curve is steep and for some companies, these
changes need to be implemented in time for the 2024 reporting year.

Automate TCFD with ESGTree's TCFD Reporting SaaS

ESGTree’s TCFD Reporting Solution serves as a beacon, addressing these intricate challenges by automating scenario analysis and carbon calculations. By streamlining the reporting process, our platform significantly curtails procedural & resource time and costs, lending critical support during the assurance process. This not only reduces expenses but also equips financial institutions to furnish justifications to auditors and assurers, ultimately driving down the number of observations and associated costs.

Pioneering the Future of ESG

Climate resilience is paramount for financial institutions. With the TCFD Reporting Solution, you not only meet regulatory requirements but also elevate your sustainability strategies.

Pricing and Availability

The enhanced ESGTree platform, now inclusive of the TCFD reporting automation
tool, is open for use. Existing ESGTree clients seeking to integrate this enhancement can contact their dedicated account manager.

Click here to learn more about ESGTree’s TCFD Software Solution for Financial Institutions or fill out the form below to book a demo.

Feel free to reach out to us on [email protected] with any other queries. 

ESGTree helps private capital investors automate ESG data collection and analysis for their portfolio companies. Our platform features include our carbon calculator, customizable and automated ESG frameworks, multi-level report viewing, trends analysis dashboard, and other features aimed to make ESG work for everyone.

Click here to learn more about ESGTree’s ESG Data Management & Reporting Software for Financial Institutions

#ESGTree #TCFDReporting #SustainableFinance #ClimateResilience #FinancialInstitutions

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A Core Tool for Financial Resilience​

Integrating the TCFD framework into ISSB Standards

Reporting GHG Emissions: A Novel Requirement

Automate TCFD with ESGTree's TCFD Reporting SaaS

Pioneering the Future of ESG

Contact Us

Contact Us

Email

[email protected]

Office Addresses

Canada: ESGTree, CPA 4th Floor, 140 West mount Rd N, Waterloo,
ON N2L 3G6, Canada

United Kingdom: ESGTree, 33 Queen Street, London EC4R 1AP, United Kingdom