As ESG regulations come into effect and stakeholders become more engaged, companies are increasingly looking to third parties to provide services with broader scope and more added value - extending beyond pure data acquisition.
The size, shape and cost of these services differ greatly depending on the high-level requirement, some examples include:
A leading UK financial services firm, with a significant insurance and investment management business, engaged us to review and provide assurance on a significant service procurement. This decision involved choosing an ESG data platform, covering fund look-throughs, data aggregation, data mapping to frameworks and regulations, and providing ratings to non-public and alternative investments.
Our client’s priority was to move most of the operational overhead and technical complexity required to conduct ESG data activities. The firm wanted to find a vendor to provide a single platform, which would consolidate the fund look-through data across listed, public and alternative investments, as well as combine it with ESG data from a selection of market data vendors, then present the resulting combined dataset in a web-based analytics platform.
The financial services company wanted the platform to provide a way to explore the ESG data market, map ESG metrics to specific regulations and standards/taxonomies and provide templates for fund-level ESG scoring. Crucially, our client intended to use this blended dataset as a key data feed in to its broader ESG reporting platform, with data normally being accessed via an application programming interface (API), rather than via a user-based application.
To meet the firm’s goals, we conducted a deep, systematic technical and business review of the requirements, the proposed solution and the contractual arrangement; with a goal of ensuring that it met the firm’s requirements and provided long-term value.
Key considerations and review items included:
As a first step, we mapped out the end-to-end service, including the key activities on our client’s side, to understand the key integration points and the expected service hand-off points between the vendor and the buyer.
Using our team of ESG, data and financial services experts, we then proceeded to conduct our assessment leveraging our ESG data assurance methodology, breaking out the core components and mapping them to our ESG service procurement framework. This resulted in 10 key points to consider:
6 Commercial value and contract break-clause
Evaluating whether vendors offering is in line with the buyer's requirements, competitive with current market offerings and pricing, including the effectiveness of the break-clause.
7 Estimations/gap closure process
The buyer's processes and automated provisioning systems for closing material data gaps that exist after processing by the vendors.
8 Data integration and reporting
The extracting of the data from vendors system and integrating into the buyer's internal ESG analytical solution run by their Singapore unit.
9 Overall process governance
The proposed end-to-end key operating procedures and quality monitoring for the overall process.
10 Service management
App SLA uptime, user training and support, as well as change management.
Our final report to the client identified several areas of concern around this procurement, including:
We also highlighted to our client several gaps, which we needed to close. We had to build a compelling and robust ESG data strategy, which articulated our client’s position within the organisation on how this data will be used to meet ESG and sustainability commitments.
We also had to consider how ESG-specific governance processes would be applied to the vendor’s offering. This is especially important for ESG use cases, due to the rapidly evolving regulatory and competitive landscape. As such, financial services firms must account for frequent changes to internal ESG standards and ESG regulations, and have a clear plan for how these changes will be accurately reflected across internal and external ESG reporting platforms.
The first actions for firms will depend on where they are on their ESG data journey, but willingness to challenge and engage external viewpoints will help in strengthening and adding validity to their data.
Using our technology and platform frameworks, market insight, ecosystem partnerships and specialist ESG knowledge, we can support your ESG technology and data strategy. Whether it’s conducting a buy v build analysis, assurance over which data sources are required from market data providers, running a ESG procurement round or assuring an in-flight service integration.
Our team has the technical and business experience to help you make the right strategic decisions, and build robust ESG reporting platforms. Learn more about ESG data assurance or get in touch to discuss any of the topics raised.