The Sustainable Finance Podcast: Creating a standard playbook for ESG investing

Laura Callaghan, associate director of ESG services at Novata, is overseeing the service team’s efforts to move the organization beyond the perception of being only a technology platform. In my interview with her, Callaghan explores the critical need for convergence and harmonization of ESG frameworks and metrics across companies, industries, regions and indexes. 

Callaghan begins by explaining ESG convergence, or interoperability. 

“Interoperability is essentially a way of mapping different frameworks, different regulations, different standards, and even down to the granularity of different metrics and figuring out how they map to each other. Where are the similarities? Where are the differences? And ultimately from a business perspective, it’s really figuring out where those crossovers are to avoid duplication and effort,” she explains.

Discussing the need for ESG metric convergence, Callaghan notes the growing popularity of ESG metrics over the past two decades and the challenges in achieving convergence. But, despite some progress with specific frameworks and regulations, Callaghan highlights the long journey ahead for achieving standardized, globally accepted frameworks.

“I think we’ve still got a long way to go before we really hit that point of having a standardized international globally accepted framework,” she says. “We have all of these mapping documents available, but there’s definitely no one-size-fits-all approach to ESG convergence at the moment.”

Supporting companies in their ESG data collection efforts is a key focus, Callaghan explains, with a dedicated team that monitors what’s going on internationally, regionally and locally.

 “We have a huge metric library as well as a standardized set of metrics. . . .  We’re really trying to steer the direction of standardization. And with that standardization, by using Novata metrics, our customers also get access to our benchmarks.”

When it comes to ESG reporting, Calahan explains that customers are encouraged to think about what’s coming up: “We  would work with our customers right at the beginning to figure out what their success criteria is and how we can build that into the data strategy as well. Wading through all the regulations and frameworks is definitely something we do.”

Callaghan discusses the implications of standardized ESG reporting for corporate disclosure practices and investor engagement. 

“The information that investors are asking for is . . .  how companies are performing, what risks may exist, and also what opportunities could be leveraged. But I think it’s also really important to acknowledge that a lot of the time, companies themselves want to collect their own ESG data to either inform their performance, to engage their workforce, or even communicate with broader stakeholders that go beyond investors.”

Addressing the potential impact of political changes on ESG practices and corporate resilience, Callaghan emphasizes the ongoing importance of net zero goals and consumer demands for transparency.

“I don’t see some of those commitments being impacted by the elections. Depending on how things go at the end of the year, we could expect certain things to be postponed. But again, with elections happening every four to six years, I think we will start to see things just continually shift. And a lot of that also comes from demands from individuals just wanting to have more information, more transparency.”

Finally, Callaghan explains how Novata adapts to regional differences in ESG regulations and frameworks, particularly with the opening of their new office in Singapore. 

“Regional interoperability is a really interesting one. From a geographical perspective, the same types of topics come up as being important” she says. “I think we’re starting to acknowledge that in the past we really haven’t had that many human rights laws or regulations in place globally. And particularly from an APAC perspective, there’s going to be a lot of pressure on businesses, and particularly suppliers, to provide this information to European countries. They’re going to have to ask for this as part of the CSRD.”

For more insights, watch the full interview with Laura Callaghan on The Sustainable Finance Podcast.

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