Tracking ESG far more important than carbon footprints
By Leon Gettler, Talking Business
ESG (environmental, social and governance) is now important for businesses.
A few years ago, the screws from regulators and big investors really came down hard on US corporates to reveal their ESG factors right throughout their supply chains.
That is a lot of paper work.
Enter Fiscal Note, a software solution that does the work. Fiscal Note has just gone public on the New York Stock Exchange. It is a $US1.1 billion company which is now the leading technology provider of global policy and market intelligence for next-generation carbon and ESG management software solutions.
Fiscal Note has 800 employees and 3000 enterprise/government clients, predominantly in the US. It is the leading provider of ESG information for corporates from a software perspective. Fiscal Note is now coming to Australia.
ESG CHANGES THE GAME
The impact of ESG on the big corporates has had an impact right throughout the market.
“Those big companies – the Apples, the Microsofts – started putting huge pressure on their suppliers to provide that information,” Fiscal Note managing director for ESG at Equilibrium and Fiscal Note, Frank Meehan told Talking Business.
“That ripple effect is what you’ve seen in the last two years, in terms of a much greater focus on corporate carbon emissions – and it’s very important for investors.”
Mr Meehan said there was now a lot of concern from regulators right around the world, and that included the Australian Securities and Investments Commission (ASIC), that some companies were not being truthful.
He said the carbon reporting had been done by consultants “in a haphazard way on Excel spreadsheets”. There were no audit trails and it took a long time to gather the information.
Software solutions like Fiscal Note became big businesses as regulators were now cracking down on companies to report their ESG data.
ESG AS ESSENTIAL AS FINANCIAL SYSTEMS
Mr Meehan said the importance of getting ESG right, into the future, could not be understated.
“It’s really going to become as essential as the financial system,” he said. “It’s going to become very software driven, the same as finance is to make sure those numbers are accurate.
“We are working with large corporates with multi-national operations.”
Mr Meehan said the numbers on key issues were far-reaching.
“The thing about carbon is you need to know everything,” he said. “You’ve got to know transport, you’ve got to know electricity, waste, water, everything. How the building is constructed, the suppliers and supply chain. That is such a huge task beyond the realm of Excel,” he said.
Mr Meehan said there were some companies that just specialised in carbon.
FiscalNote is the next generation of ESG specialists, focusing not only on carbon bit also on water, biodiversity, social and governance.
He said after COVID-19, companies were now much more aware of potential supply chain issues. Suppliers may say they don’t have a problem with emissions, their water or labour force. But Fiscal Note has a sophisticated artificial intelligence engine which can pick out all the issues they are trying to conceal.
“You can’t hide away from this stuff anymore,” Mr Meehan said.
“And that kind of verification down the supply chain, and not just relying on what the suppliers are saying, they are independently verifying that through AI and machine learning on external published reports is kicking in as well.
“As part of this, Fiscal Note provides its customers with a benchmarking tool allowing them to benchmark their operations, their suppliers their competitors, and to identify risks.”
Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness.