Social sentiments are shifting towards a more conscientious society, a greener planet and improved governance practices. This consciousness drives most financial institutions and corporates of all sizes to be cognizant and in control of their ESG standings, including their investments, trading or underwriting positions, supply chains, and more. Companies are embedding ESG considerations into their risk management frameworks, disclosures and strategic decision making.
ESG data is Big Data that comes in many formats; whilst some of it is reported and structured, a lot of it comes in an unstructured form, thereby making it difficult to be deciphered easily. ESG information is often self-reported, thus open to the possibility of 'greenwashing'. The ability to monitor ESG data is complicated and time-consuming and is heavily dependent on advanced technology applications such as Natural Language Processing (NLP) and advanced statistical modelling.
Off-the-shelf ESG scores are often subjective and do not provide the level of transparency required for impactful decision-making.
ESG IQ
ESG IQ is a Big Data analytics platform developed by KPMG's Lighthouse data scientists and engineers in conjunction with Google Cloud. ESG IQ will enable clients to select and pool structured ESG reference data from multiple providers and unstructured data from a wide range of sources, including news reports, social media posts, blogs, NGO reports, research reports, and pages across the web.
The platform will even pull out ESG data from 'dark data pools', such as legal documents, trade confirms (depending on the asset class), and other sources using advanced Natural Language Processing (NLP).
We believe ESG IQ is unique as it will analyse and assess multiple securities and not just companies. Our methodology can help clients make sense of multiple asset classes such as government bonds (including sovereigns, agencies and munis), corporate bonds, structured bonds (tranches of securitised products), investment funds, equities, and other illiquid products such as loans or mortgage-backed securities.
ESG IQ aims to help clients understand the drivers behind their ESG standings, providing the root-cause analysis of what factors and issues have led to the assessment. We let data tell the story and let clients decide materiality and weightings for their portfolios, including opportunities for positive interventions in the real economy. The client can then determine for themselves the relevance of the findings — recognising that different factors may have a greater or lesser weight depending on the client's guiding ESG strategy.
ESG IQ will not only allow financial services providers to assess those they invest in, lend to, insure or procure services from, and it will also enable corporates to evaluate themselves against their peers on ESG factors. Allowing corporates to understand how investors perceive them on ESG factors can help them tailor their strategy and reporting to meet expectations.
KPMG and Google Cloud, working together
KPMG and Google Cloud are collaborating to make new advances in ESG data science, powered by Google Cloud. Our aim is to drive innovative business outcomes as ESG scoring, reporting and assurance for financial services companies evolve at pace. With data and analytics as critical components to any ESG assessment, Google Cloud provides the engine needed to power more sophisticated ESG models.
More broadly, the combination of KPMG and Google Cloud can help drive business transformation across Asset Management, Banking, Capital Markets, Fintechs, Insurance, Payments and Private Equity. The joint effort around the ESG IQ platform will enable financial institutions to have a more comprehensive ESG strategy.
At Google, we have a strong commitment to sustainability, and we strive to build sustainability into everything we do. We are excited to collaborate with KPMG, bringing the best of our cloud capabilities to help develop innovative data and analytics solutions that enable customers and decision makers to assess sustainability impact more consistently with financial impact. It is exciting to see how financial services consulting organisations like KPMG are embracing cloud technologies and building powerful solutions to empower faster and more informed decision-making for their clients, including for ESG-related risks
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