Most of us now recognize that the ascendance of data in our lives is not always a good thing. We are tracked across the internet and fed a steady stream of information that matches our personal interests and views—or at least what some artificial intelligence algorithm has been programmed to perceive as our views.
Yet, when it comes to arguably the most important issues facing our world, we have very poor data. Sustainability, while an overused term, refers to the issues we must manage so that our children and grandchildren will inherit a better planet and standard of living. And unless you have been living in a cave, you know that this promised future is threatened.
So where is all the great sustainability data?
Perhaps the largest and most pervasive threat around sustainability is climate change. Not a month goes by without another “100-year” weather event. Scientists have been raising the red flag on climate change for decades now, yet shockingly, we remain woeful at collecting, measuring—and thus, most important—managing, our carbon impact.
But things are changing rapidly. Suddenly, sustainability topics—with climate change in the lead—have emerged from a niche area into the mainstream of global commerce. Evidence of the change is everywhere.
The head of the world’s largest asset manager—Larry Fink, CEO of the behemoth investment firm BlackRock, which controls $8 trillion worth of assets—has warned companies to provide better climate data or face a vote against management. Last week, a powerful group of asset owners released a Net Zero Investment Framework.
The International Financial Reporting Standards (whose standards are mandated for financial disclosure in most countries in the world) is now taking on sustainability standards and focusing on climate change first.
And the U.S. Securities and Exchange Commission recently announced an ESG Enforcement Task Force with this very revealing statement from Allison Herren Lee, the acting chair:
“Climate risks and sustainability are critical issues for the investing public and our capital markets. The task force announced today will play an important role in enhancing and coordinating the efforts of the Division of Enforcement, the Office of the Whistleblower, and other parts of the agency to bolster the efforts of the Commission as a whole on these vital matters.”
The message is clear: We need better sustainability information, particularly on climate change.
And while some people (like Felix Preston, director of sustainability insights at Generation Investment Management) have written passionately and authoritatively about the need for better sustainability data for a while, as someone who worked in corporate sustainability for many years, I am dumbfounded at how we have gotten to this place with such poor tools to measure and manage climate emissions, risks, and opportunities. I think this is because, until now, sustainability has always been treated as a “reputational matter.”
Today, more than 90% of the S&P 500 publish sustainability reports which are highly produced and lengthy recitations of corporate “good works.” These reports help document company actions, communicate with stakeholders, and build the brand for customers and employees.
But they are not the right tool for “investor grade” information, and don’t come close to aligning with the sophistication of financial reports. They do not provide sufficient data sets to truly manage these all-important issues.
For example, it is next to impossible for corporate leaders to make informed decisions about climate risk and opportunities with annualized data that is months old. To get this right, companies need accurate, real-time information that can be forecasted into the future. With this caliber of data, they will find cost savings and new business opportunities that will not only advance sustainability, but also corporate fortunes.
This call was echoed repeatedly by large asset owners and managers at a recent Private Capital ESG Conference, hosted by Boston Consulting Group. There were $13 trillion in managed assets and ownership of more than 3,000 global companies represented by those in attendance, and they expressed a need to know “financed emissions”—that is, the climate impact of their investments—so that they can use their market power to improve the situation. And they can’t do it with data the way it is today.
At the event, global investment giant EQT’s CEO Christian Sinding emphasized that while standard reporting frameworks have been helpful, investors require better data sets to not just measure risk, but also—more importantly—to create value.
Another leader in using investment leverage to drive change has been CalPERS CEO Marcie Frost. She had two key recommendations. First, define what matters, because if you don’t, nothing gets tracked or measured. And second, focus on data.
It has been said that “data is the new oil” to underscore the importance of accurate, up-to-date information in today’s digitally driven economy. Or if you have ever spent time with engineers, you’ve heard their axiom: “In God we trust; others better bring data.”
Now that sustainability issues—climate change in particular—are rapidly becoming integral to our economy and a sustainable future, we must work to improve the accuracy and timeliness of data. The success we see here will have a direct impact on the success we all witness in our decarbonization efforts.
Fortunately, the change is coming—and not a moment too soon.
Tim Mohin is the chief sustainability officer for Persefoni AI. Formerly, Mohin served as chief executive of the Global Reporting Initiative; he also held sustainability leadership roles with Intel, Apple, and AMD and worked on environmental policy within the U.S. Senate and Environmental Protection Agency. He is the author of Changing Business From the Inside Out: A Treehugger’s Guide to Working in Corporations.
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