Podcast: The Devil is in the policy detail-the role of data and data assurance in greening the financial system

The Financial Inclusion Centre published a major report in 2020 called Time for Action – Greening the Financial System [1]  We are following up that report with a project called The Devil is in the policy detail – will financial regulation align financial market behaviours with climate goals?

This project is evaluating specific policy and regulatory measures proposed by the main financial regulators to align the behaviours of financial markets, institutions, and consumers with climate goals. It also considers the importance of reporting and data in the challenge. We are very grateful to Friends Provident Foundation for also supporting this follow up project.

As part of the project, we are producing a series of podcasts on the key regulatory issues. In previous podcasts, Mick McAteer and Professor Robin Jarvis, who are leading on the project, discussed the role of the main regulators.

Now we are speaking to a range of diverse and influential voices in the debate. In the latest in the series, well known financial journalist and expert commentator on the issues, John Lappin, talks to Matt Davies, a Senior Policy Advisor at the Open Data Institute. They discuss, among other things, the importance of data assurance in terms of finance and investing and sustainability and how it can help combat greenwashing.

It is a fascinating and important discussion. Accessible and trustworthy data will be central to the challenge of aligning financial market behaviours with climate goals.

Matt talks about the role the Open Data Institute sees for itself in helping establish trust in data as it relates to finance and sustainability. That includes looking at climate externalities and how they may not be priced into current company valuations. In practical terms that may mean looking at how a company or a portfolio might be assessed in terms of scope one or two emissions.

“It is a matter of thinking of the information you need rather than taking a data-first approach,” he says.

There are, for example, significant data gaps around energy production and consumption likely to be required by companies and those assessing portfolios in terms of the scope 1,2 and 3 emissions.

A key concern for the organisation is the role of data assurance in combating greenwashing amid worries it could derail the green finance agenda.

Remarkably, ODI research shows there are around 900 data assurance firms in the UK, which includes many firms offering environmental data assurance. He suggests better uptake of data assurance could help tackle greenwashing by bringing consistency and reducing the ability of organisations to shop around for firms that assess them to a lower standard. It should improve transparency and also means firms cannot mark their own homework.

The pod also discusses open versus proprietary data, with the ODI generally supporting an open data ecosystem, but highlighting a debate about what data should be totally open, shared with smaller groups, or be closed. To that end, data institutions are growing in importance to deal with complex use cases.

Davies adds that there may be a case for public or regulatory involvement ensuring quality of data potentially involving mandatory standards and policing by regulators.

Please give the podcast a listen.   We hope it is informative and interesting. If you have any questions or would like further information on the overall project, please contact Mick McAteer on mick.mcateer@inclusioncentre.org.uk or mickmcateer92@gmail.com

[1] Time for Action – Greening the Financial System | The Financial Inclusion Centre