Over 72% of Financial Institutions to Ramp Up Investments in ESG Technology Amid Climate Risks

As climate-related risks escalate globally, over 72% of financial institutions plan to invest up to $500,000 or more in ESG (environmental, social, and governance) technology to enhance climate risk solutions. According to a recent survey, future investments are expected to focus on emissions data, transitional climate risk modeling, and regulatory reporting tools.

The report, titled “Chartis Market View: ESG and Climate Risk Survey,” explores how global financial institutions are incorporating ESG and climate risk factors into their risk management and investment strategies. BCT Digital, in collaboration with Chartis Research, published the findings on Thursday.

The survey gathered insights from 77 ESG and climate risk practitioners representing financial institutions with assets under management ranging from $1 billion to $500 billion, spanning the APAC, North America, Europe, and MENA regions.

Key findings from the survey indicated that regulatory compliance is the most significant challenge for 52% of respondents in the realm of ESG. Additionally, 48% of respondents identified risk assessment and mapping relevant ESG factors as major challenges, while another 48% pointed to integrating ESG into operational and financial workflows.

Regarding climate risk, the main challenges include meeting regulatory stress testing expectations (67%), accurate greenhouse gas (GHG) accounting (56%), and operational integration of climate risk into product lines (50%).

Most firms review their ESG strategies quarterly, with an average annual expenditure of $250,000 to $500,000. Institutions in North America and Europe are more likely to exceed $500,000 in annual spending. Future investments are expected to prioritize ESG data and scoring products, governance, risk management and compliance (GRC) solutions, and regulatory compliance and reporting tools.

Jaya Vaidhyanathan, CEO of BCT Digital, highlighted the lack of uniformity in ESG and climate risk reporting standards, noting that different countries and regions have their own frameworks and definitions, which complicates consistent reporting for multinational corporations.

Sid Dash, Chief Researcher at Chartis, emphasized the central role of data and data management in complying with ESG guidelines, stressing the importance of having a fully integrated framework to manage data across the entire value chain.

The survey included industry segments such as retail, corporate, and commercial banking, asset management, private wealth management, broker-dealers, cooperative banks, microfinance institutions, credit unions, and non-bank financial institutions.

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