Skip to main content

ESG in Finance: 3 Pillars of Success

Victoria Ebel, Appian
March 20, 2023

ESG (environmental, social, and governance) factors have become a major focus in crafting the business strategy and investment strategy of financial services institutions. ESG criteria are being integrated into investment decisions, risk management strategies, and corporate reporting. 

3 success factors for ESG in finance.

Pay attention to these three key pillars of success when it comes to implementing sustainable finance.

1. Integration of ESG into investment decisions.

The first pillar of success is the integration of ESG factors into investment opportunities. This means assessing the environmental and social impact of potential investments as well as the corporate governance practices of companies.

[ How can financial services organizations galvanize ESG efforts? Get the eBook. ]

Investment managers can integrate ESG considerations by including ESG data in their analysis and decision-making processes. For example, they can use ESG ratings and assessments to evaluate the corporate sustainability performance of companies and sectors for more sustainable investing choices. Companies that have strong ESG practices are often more resilient to risks and may be better positioned to take advantage of new opportunities. In addition, integrating ESG into investment decisions can help investors align their portfolios with their values and goals.

2. Reporting and disclosure of ESG information.

The second pillar of success is the reporting and disclosure of ESG information. This means companies provide transparent and accurate information about their ESG practices to investors and other stakeholders.

ESG reporting can promote more responsible investing by helping investors understand the risks and opportunities associated with a particular investment as well as the impact that a company's operations may have on the environment and society. In addition, ESG reporting can help companies demonstrate their commitment to ESG issues and build trust with investors and other stakeholders.

[ What do global ESG leaders think about the nature of ESG risk and how to make ESG data more manageable? Access the whitepaper. ]

3. Wise use of technologies, including process automation.

While both of these first two pillars are important, they often prove challenging in practice because financial services companies struggle to obtain consistent, accurate ESG data. Technology solutions can play a critical role here in helping financial services professionals integrate ESG considerations into their corporate strategies.

Data collection and analysis: ESG data is often complex and difficult to analyze. Find a solution with the capability to collect, process, and analyze large amounts of data efficiently and accurately. This can help companies identify risks and opportunities related to ESG factors and make more sustainable investing decisions.

Consider the advantages of a data fabric that breaks down data silos, allowing an organization to seamlessly connect ESG data from disparate software systems and departments.

[ Want to learn more about how to solve your data silo problems and speed up innovation? Get the eBook: The Data Fabric Advantage. ]

ESG ratings and assessments: Many ESG ratings and assessment providers use technology to generate scores and rankings based on a range of ESG factors. These providers can help investors identify companies that are performing well or poorly on ESG issues and assess how well companies are managing ESG risks.

Reporting and transparency: Technology can help companies report on their ESG performance more transparently and accurately. For example, blockchain technology can track and verify sustainability data, while machine learning algorithms can help identify and correct errors to meet reporting requirements.

Engagement and collaboration: Tech solutions with enhanced collaboration capabilities and heightened transparency can also facilitate engagement between investors and companies in sustainable finance conversations.

Process automation: Finally, solutions with process automation can help financial services professionals integrate ESG considerations into their workflows more efficiently. This can include automating data collection, analysis, and reporting processes, as well as ESG-related compliance checks and risk assessments.

A process automation platform can help an organization automate processes end-to-end rather than just automating certain parts of a process. A process automation platform will also help you avoid trouble that can arise when an organization uses multiple automation solutions that don’t communicate well, which often becomes a big issue as organizations try to scale their automation and ESG efforts. The right process automation platform will support your ESG efforts now and into the future.

For expert advice from PwC and Appian on handling ESG challenges, get the whitepaper: Seize the ESG Opportunity with Simplified, Data-Driven Processes