PARTNER CONTENT
By Caitlin Pentifallo
Head of ESG Metrics and Regulations at Novata
If there ever was a sign that the conversation around ESG investing has gone mainstream, the recent story direction on the popular HBO Max show Industry is a clear indicator. In the latest episodes, ESG investing has been at the forefront, demonstrating acutely, albeit not always accurately, the realities of being an ESG professional. The show portrays ESG as a hedge bet, a prop play, and as it often is in the real world, a source of controversy as opponents often launch attacks to discredit its investing approach.
While the heady investors of Pierpoint & Co. (the fictionalized investment bank anchoring Industry’s drama) are always up to no good with their investments, they continuously seem to evade any oversight (this is television, after all). In the real world, regulatory pressures are ever-increasing, and compliance remains an outstanding challenge for investors. Navigating the challenges and requirements of data collection, however, need not be as onerous and taxing as those bemoaning the regulators would have you believe. While the landscape of regulation might be ever-evolving and complex, it can also offer opportunities to mitigate compliance risks, improve transparency, and collect data to inform business decisions and deliver long-term growth.
In the past few years, there has been a rapid rise in the introduction of new regulations aimed at increasing transparency in disclosures around environmental, social, and governance (ESG) considerations. The EU has felt the biggest impact, as the Corporate Sustainability Reporting Directive (CSRD) will impact approximately 50,000 companies. Complicated phase-in requirements, determining scope, and timing have made understanding how, when, and what data points to report especially challenging. The International Sustainability Standards Board (ISSB) Standards have been introduced into regulatory frameworks across 20 jurisdictions, accounting for a staggering 55% of global GDP. While this complexity can be a lot to manage, being proactive about meeting these requirements can help companies looking to ensure long-term viability when it comes to reporting and compliance.
Novata’s Metrics & Regulations team works closely with investors and companies to help them understand the data they need to collect and how to collect and calculate it accurately. For us, complying with regulations is not the ultimate end goal. The objective of the regulations is not to overburden companies with reporting effort and cost for reporting’s sake. Instead, observing and then changing business behavior to become more sustainable is the shared and intended outcome. The data companies collect to comply can help businesses get a better grasp of key areas of risk, financial and otherwise, as well as opportunities to improve processes and practices to drive long-term value. Prioritizing this mindset can help shift the approach toward reporting and ensure teams are adequately leveraging the information they are collecting.
As with any show’s pilot and initial release, things are going to change. Similarly, there are still some ways to go toward consistency and clarity in almost all of the recently released regulations. But even as regulators work out the kinks in their plans, they will still require companies and investors to comply and report, even in the face of uncertainty. For companies subject to ESG regulations, some critical first steps to take include understanding the regulations in your jurisdiction, collaborating with legal teams on what is required for compliance, and putting processes in place to collect data.
It may not be the flashy IPO and stock market tickers celebrating ESG victories shown on Industry, but consistent investment into data collection systems and infrastructure, practice establishing norms and expectations around ESG reporting, and eventually setting up reporting cadence and data sharing can help pave the way for regulatory compliance and tangible, sustainable outcomes for businesses.
Caitlin Pentifallo, Head of ESG Metrics and Regulations at Novata – Caitlin leads cross-functional teams, including data scientists, product managers, customer success, and revenue specialists, to develop and implement comprehensive ESG metrics for private market clients. With over 14 years of experience in ESG data analysis, impact evaluation, and strategy development, she specializes in helping purpose-driven organizations effectively measure and communicate their sustainability and reporting objectives. Caitlin holds a PhD in Sociology from the University of British Columbia, where her research focused on the impact of indicator-based assessments on social and policy outcomes. She is a credentialed evaluator (CE) with the Canadian Evaluation Society, a member of the American Evaluation Association, and certified in Social Return on Investment (SROI), the Global Reporting Initiative (GRI), and utilization-focused evaluation. Caitlin is deeply committed to advancing ESG measurement and reporting practices, using data to drive informed decision-making and positive social and environmental outcomes.
