Amid increasing global trends in Environmental, Social, and Governance (ESG) and climate risk spending, over 72% of financial institutions plan to invest up to $500,000 in ESG technology, according to a new survey.
The ‘Chartis Market View: ESG and Climate Risk Survey’ by Chartis Research and BCT Digital reveals that most firms review their ESG strategies quarterly, spending an average of $250,000 to $500,000 annually.
The survey highlights that investments will primarily target data and scoring products, with over 60% of respondents focusing on this area, followed by expenditures on ESG-focused governance, risk management, and compliance (GRC) solutions.
The survey involved 77 ESG and climate risk practitioners from financial institutions with assets under management ranging from $1 billion to $500 billion, spanning the Asia-Pacific, North America, Europe, Latin America, and the Middle East and North Africa (MENA) regions.
Regulatory compliance is the biggest challenge for financial institutions, with nearly 52% of respondents identifying it as their main concern. Additionally, 48% cited risk assessment, which involves identifying relevant ESG factors for their business, as a significant challenge, and around 48% also found integrating ESG into operational and financial workflows to be difficult.
Sid Dash, Chief Researcher at Chartis, stated, “Compliance with ESG guidelines can be challenging for many financial institutions, and data management is central to the process. A fully integrated framework that enables data management across the entire value chain is crucial.”
In the climate risk domain, meeting regulatory stress testing expectations is the primary challenge, with nearly 67% of institutions highlighting this issue. Accurate greenhouse gas accounting (56%) and integrating climate risk operationally into product lines (50%) are also significant challenges.
Jaya Vaidhyanathan, CEO of BCT Digital, commented during the report launch, “There is a lack of uniformity in ESG and climate risk reporting standards; different countries and regions may have their own frameworks and definitions. This disparity makes it challenging for multinational corporations to maintain consistent reporting.”
Currently, most firms spend between $250,000 and $500,000 on climate risk solutions, with future investments likely to focus on emissions data, transitional climate risk modelling, and regulatory reporting tools.