Finance Monthly - March 2022

45 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s Critically, everyone around the boardroom table — whether an ESG leader or not — has a key role to play. The CFO in particular needs to ensure that all teams become part of the process. This is where groups such as the UN Global Compact CFO Taskforce come into their own. This task force was set up to guide companies in aligning their sustainability commitments with credible corporate finance strategies – enabling advice and idea-sharing between CFOs for peer-to-peer support. Collaboration is key and establishing a circle of trust optimises the reporting process. Without this, organisations are more likely to continue to face challenges with ESG reporting and may struggle to gain stakeholders’ trust. This year, organisations will need to establish a clear system of ESG reporting roles to ensure those processes can be streamlined for efficient, consistent, and trustworthy ESG reporting. Continued standardisation of ESG, and tighter regulations Change is a constant when it comes to the demands put on the annual reporting process. For example, the CSRD proposed by the European Commission last year aims to enhance and strengthen the measures already in place under the Non-Financial Reporting Directive (NFRD) and is, in part, the result of a series of consultations that started as far back as 2018. This year, financial firms will also need to start preparing for the UK Financial Conduct Authority’s mandatory climate-related disclosure rules which are due to come into force by 2025. As a further change to the ESG reporting landscape, the International Sustainability Standards Board (ISSB) – announced at COP26 – will provide consistent standards for organisations across the world, significantly reduce crossframework mapping, and simplify some of themore painful elements of the reporting process. The ISSB will be pivotal to meeting demands from investors for transparent, reliable and comparable reporting by companies on climate and other sustainability-related matters. The move towards greater standardisation, control and rigour is being driven by the need for greater transparency. This transparency fosters trust in data, and this is vital considering that ESG is now a critical business success factor. The demand for businesses to improve the quality of the ESG information that they share with investors and the market will continue. If a company is to stay on top of the evolving regulatory requirements and ensure that it can deliver consistent, transparent reports, it will need to futureproof annual reporting processes. Bolting on solutions to a reporting framework may seem like the quick answer but it won’t deliver the sustainable, long-term value required. It will only cause delays, inefficiencies, and endemic longterm disruption. Organisations are recognising this, so we can expect to see the need to futureproof annual reporting processes become more of a priority in 2022. ESG has moved swiftly to the top of companies’ priority lists. The driving forces behind the acceleration are clear; lenders expect greater visibility, new regulation is coming into force, and both customers and employees are increasingly values-driven. As organisations double down on tracking and publishing data that demonstrates their ESG prowess and progress in 2022, the trends above will shape their approach to streamlining the processes which make that reporting possible. “Until ESG is standardised and everyone is on a level playing field, organisations need to establish how they can provide greater consistency and transparency of ESG data. Key to this is working with investors to understand what it is they want to see.”

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