The environmental, social and governance (ESG) industry is at an inflection point- corporates want to unlock return on investment (ROI) for their sustainability initiatives, and investors demand more transparency on their impact investing strategies. Nasdaq’s role as an exchange operator, public company and provider of ESG-focused marketplace solutions gives us a unique perspective on the challenges corporates face in navigating the capital markets and their engagement with investors.
In this Q&A with two Nasdaq executives at the center of sustainability, we speak with Randall Hopkins (RH), global head of ESG Solutions, and Erika Spence (ES), head of ESG Data, to hear how Nasdaq’s Capital Access Platforms Division is taking advantage of technology to help corporates unlock ROI on their sustainability reporting processes and help investors gain more transparency through unique data and analytics, so they can make better investment decisions.
Can you tell us about Nasdaq’s approach to helping corporates and investors understand the evolving ESG landscape?
RH: We’ve been on this journey for many years now to be a true partner to corporates and investors and be a bridge that helps both groups unlock ROI. Our goals are to help corporates elevate their sustainability reporting process and assist investors in achieving transparency through unique data and analytics to make better decisions. In fact, we recently launched two new offerings designed to help corporates and investors streamline their sustainability and impact investing journeys.
Designed for corporates, Nasdaq Metrio™ is a Software as a Service (SaaS)-based, end-to-end platform that helps them to better collect, measure and report sustainability data. Since the Metrio acquisition announcement last year, Nasdaq quickly integrated Nasdaq OneReport® and Metrio legacy technologies (combines the power of two market-proven solutions with over 30 years of integrated product history). The platform also features a new Carbon Accounting and Management product for companies looking to focus on their scope 1, 2 and 3 emissions.
ES: Nasdaq’s approach is to help corporates and investors understand the evolving landscape and reduce the complexity and friction around ESG. We aim to provide insights to help corporates build their programs and strategies and to assist investors focused on impact investing to unlock more transparency. The new Nasdaq eVestment® ESG Analytics solution generates greater transparency for the global institutional market, so investors can make better data-driven impact investment decisions.
It was developed in response to market trends in the institutional investing space demanding depth and disclosure for sustainability data to better manage risks and exposures. It will help asset managers better quantify and showcase the ESG impact of a portfolio’s position to the market. Additionally, asset owners and consultants will now be able to better validate how asset managers’ ESG investment thesis translates to outcomes.
The offering provides qualitative and quantitative information for the institutional investment community to understand risks and exposures. Asset owners, managers, investors and consultants will now have more transparency – including sustainability and diversity data – so they can make more informed decisions. It also leverages alignment solutions and data sourced from ESG data providers including Matter, a Nasdaq Ventures portfolio company that aggregates company-level quantitative data.
What are the main questions you are receiving from corporates and investors? What trends are you seeing in the space?
RH: Properly organising and allocating work across disparate teams is a big trend, given proliferating priorities and business requirements. The needs of corporates and investors are constantly changing, and we are working closely with them to develop solutions to reduce complexity, cost, and increase impact for our clients. This includes growing our range of solutions over the last decade by tapping transformative technologies to create solutions such as an intelligence-enabled sustainability data tool to monitor, analyse and benchmark against corporate sustainability reports and communications.
Further, to help corporates inform their carbon credit purchase decisions and sustainability initiatives, Nasdaq’s ESG Advisory team published a “Global Net Zero Pulse” report that uncovered tremendous opportunities for corporates to affect change, with only 25 percent of respondents reporting net zero commitments at this time. Further, a majority of companies surveyed cited a variety of stakeholders, led by investors, customers and employees, as key influencing factors to set net zero pledges.
The inaugural report is based on results from 248 sustainability professionals about how they are thinking about carbon credit purchase strategies, corporate net zero alignment and carbon market dynamics. Select key findings include:
25% of companies have set a net zero target and another 25% expect to within two years.
Carbon removal strategies, like those on Puro.earth, are the most popular among corporates.
78% of companies surveyed said they have implemented some type of credit purchase strategy.
88% of companies feel pressure to set a net zero target as a part of their climate change efforts.
Education is one of the biggest hurdles companies face in developing a carbon credit strategy.
ES: A couple years ago, several asset managers reached out to Nasdaq to help them keep up with the explosive growth behind impact investing. At that time, there was no apples-to-apples comparison or standardisation of ESG data models - it simply did not exist. Based on where we sit at the intersection of the markets, they asked us to launch ESG and diversity and inclusion questionnaires, which we continue to enhance and refresh as the market demand for intelligence evolves. This has resulted in helping them to better execute their sustainability mandates, and to provide more transparency to their stakeholders.
Taking us to today, this led Nasdaq to launch a unified platform for quantitative and qualitative sustainability data. The demand for impact investing continues to grow and investors demand transparency for existing workflow solutions. Clients want a seamless user experience to improve the execution of an asset manager’s intent related to ESG investments. The platform consolidates and links data from across the industry to help them understand their positions and make well-informed investment decisions.
Clients can now benefit from a simplified reporting format that showcases easy-to-read snapshots of ESG metrics calculated from holdings. Asset owners have found the measurement of carbon emissions to be helpful in validating asset managers’ claims. Additionally, asset managers have found the flagging feature within the dataset useful to prompt them to contextualize why certain positions might appear out of line with the portfolio's investment thesis (a great example is a position being held while a manager undertakes a proxy or engagement process with the issuer).
The views, thoughts and opinions contained in this Focus article belong solely to the author and do not necessarily reflect the WFE’s policy position on the issue, or the WFE’s views or opinions.