Phil Kim, senior vice president, global head of ESG product, State Street, explains that technology adds “more rigour” to ESG assessments.
As part of its coverage of Sibos 2022 in Amsterdam, Funds Europe reached out to financial experts on key topics at the conference. Read more analysis here.
Artificial intelligence and machine learning, computational strengthening, and increased global connectivity are all driving what many are calling the “big data revolution”. What is the big data revolution’s impact on ESG?
Emerging technology will add more rigour to ESG assessment, creating a new window of opportunity to analyse unstructured data and enhance transparency. Big data and AI techniques have made it possible to assess large volumes of data, allowing for more comprehensive and timely data coverage.
These techniques to date have primarily provided efficiencies upstream in the ESG data collection process by providing scale in extracting relevant ESG data from unstructured data (e.g., company filings, media, trade journals, social media, audio and video transcripts).
ESG data has primarily been sourced from corporate disclosures (inside-out). Being able to use big data to source more unstructured data provides for more of an outside-in perspective. Combining these two ways of sourcing data can yield a more comprehensive ESG assessment.
Other innovations in this area offer unique ways to improve corporate responsibility. For example, blockchain could be used to drive supply chain transparency, potentially improving authentication, tracing and visibility over outsourced suppliers and vendors, as well as enforcing better labour practices.
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