Banks Move Into ESG Wilderness After Clients Sound Alarm (2)

As clients seek transparency, banks develop capabilities to rate ESG performance. Banks have vast amounts of data and are combining the resources of their ESG, Quantitative Research and Equity Research teams to provide deeper understanding and comparability throughout the ESG landscape. One particular area called ESG metric models remains untouched by cross-border regulation. The ESG is not just “the Wild West” but a “jungle within the Wild West,” in the word of Jacob Michaelson, Sustainable Finance Advisory, Nordea Investment Bank. At one point, there was over 600 different ESG rating systems. ESG analyst cite the complexity of coming to conclusions with just data emphasizing the need for fundamental analysis and pointing towards the EU Taxonomy as a positive step towards transparency and comparability yet stress that time is of the essence. As regulators set guidance on climate risk analysis, 137 financial institutions have recently called on high carbon-emitting companies to reduce emissions in line with keeping the global temperature increase to 1.5 degrees.

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