The former Thomson Reuters business backs UN goals and digital financing initiative, makes carbon-neutral commitment
Friday, February 1, 2019
By Jeffrey Kutler
While investors may hold different views about the relationship between environmentally sustainable strategies and corporate performance or portfolio returns, Refinitiv takes a strong stand. It is emphatically on the side of sustainability.
The financial data giant, which was known as Thomson Reuters Financial & Risk before an October 1, 2018 buyout transaction led by Blackstone Group, has been providing environmental, social and governance (ESG) data for more than 15 years and serving that marketplace with, for example, the Diversity & Inclusion Index. The index was introduced in 2015 and, as of last September, tracked by the iShares Thomson Reuters Inclusion & Diversity UCITS exchange-traded fund.
In 2016, Financial & Risk was the first nonbank signatory to the U.K. Women in Finance Charter, a commitment that Refinitiv reaffirmed last November along with a goal of at least 40% female representation in senior management by 2020.
This January - not coincidentally the month of the annual World Economic Forum leadership gathering in Davos, Switzerland, where climate change and other nonfinancial risks are high on the agenda - Refinitiv took its messaging up a notch. On January 17 it announced support for three core pledges of the United Nations Sustainable Development Goals and said it aimed to be carbon-neutral by 2020.
A week later, the company said it became a data partner of the UN Task Force on Digital Financing, which was formed in November, held a meeting in Davos, and plans to present preliminary recommendations to Secretary-General AntÓnio Guterres in September. Its remit is to help bring financial technology to bear on the Sustainable Development Goals agenda.
“We believe that by unearthing insight and providing transparency around the link between sustainability and financial performance, we can drive positive change in investor behavior,” said David Craig, a regular at Davos as a Thomson Reuters executive and now as CEO of Refinitiv. Joining the UN task force as a data partner “represents an opportunity to use our role as change-makers across the financial community to encourage the development of transparent and measurable standards for sustainable finance.”
“Together with the UN Task Force and other partners such as Europol and WEF, we believe that we have a responsibility to promote more effective dialogue and information sharing between public and private entities and to provide transparent data that harnesses the transformative powers of fintech and regtech to help organizations rethink how they do business and manage risks,” Craig said in a statement.
“Transparent and Trusted Markets”
Indeed, at the time of the closing of the Blackstone transaction, Craig placed ESG and compliance offerings like Know Your Customer due-diligence tools within the broader corporate strategy: “We firmly believe that efficient, transparent and trusted markets are good for all and that Refinitiv's role is at the heart of this, providing access to clean and consistent data on a global scale. With the backing of our investors, Refinitiv will continue to deliver the critical data, insights and open technology infrastructure that the market has come to expect while driving progress for our customers across trading, risk, banking, wealth and investment management and in areas such as financial crime and ESG investment. We look forward to exciting times ahead.”
An executive appointment, announced January 21, further underscored the company's advocacy of what it termed “fair, efficient and sustainable financial markets.” Sherry Madera, who had been the City of London Corporation's economic ambassador to Asia, joined Refinitiv as global head of industry and government affairs.
“We are at a time of huge global change as technology and automation become ever more important and human roles evolve,” Craig explained. “This paired with global trends in sustainability, governance and regulation make it a busy time for engaging with both public- and private-sector stakeholders. Sherry will be focused on how these issues impact clients and will work boldly and collaboratively with the industry and governments globally to find consensus on the solutions needed to ensure that financial markets continue to be a successful force for good.”
Refinitiv was not alone in emphasizing social responsibility and sustainability at the turn of the year. The International Organization of Securities Commissions (IOSCO) issued a statement January 18 supporting disclosure of ESG matters to investors. Consulting firms EY and Synechron identified ESG as a management and regulatory priority in 2019 trend reports.
IOSCO noted that “ESG matters, though sometimes characterized as nonfinancial, may have a material short-term and long-term impact on the business operations of the issuers as well as on risks and returns for investors and their investment and voting decisions.”
Pointing out that “investors' interest in ESG disclosure is growing, and some investors already significantly value ESG matters in their investment strategy,” IOSCO mentioned the availability of frameworks such as the Financial Stability Board's Task Force on Climate-Related Financial Disclosures (TCFD), as well as the Carbon Disclosure Project (CDP), Global Reporting Initiative (GRI) and Integrated Reporting (IR). (TCFD is at the center of a two-year project, announced in November by Corporate Reporting Dialogue, driving toward “better alignment of sustainability reporting frameworks, as well as with frameworks that promote further integration between nonfinancial and financial reporting.”)
Besides continuing to monitor ESG disclosure developments and working to “understand market participants' perspectives and expectations regarding disclosure of ESG information,” IOSCO said that it “also recently established a Sustainable Finance Network of securities regulators to share their experiences and engage in focused discussions about developments in the market and across jurisdictions.”
EY, in its 2019 Bank Regulatory Outlook, said that a September 2018 TCFD status report “noted that 'the majority of the firms surveyed disclose information aligned with . . . recommended disclosures.' The disclosures so far vary in scope and quality, mainly describing climate-related risks and integration into risk modeling, rather than the financial impact on the company itself. A more prescriptive approach may be the next step, including possible inclusion of ESG in supervisory evaluations and stress testing. Regulators will be taking the proposals further in 2019.”
Synechron, in a report spotlighting digital and other dimensions of financial services industry transformation, said in a section on culture that the need for sustainable finance goals, objectives and action is “one topic regulators, banks and consumers alike all seem to agree on.” It cited the formation, announced by Bloomberg in December, of the U.S. Alliance for Sustainable Finance (USASF), “with a purpose to provide the resources and expertise to identify and streamline existing climate-finance initiatives, encourage greater transparency across climate-related financial risks and opportunities, and drive more capital to sustainable investments.”
Refinitiv said in a press release that it “expects to be powered by 100% renewable energy by end of 2020 and is committed to reducing annual carbon emissions every year by an average of 10% over the next five years, becoming a more sustainable business longer term.”
CEO Craig put that in the perspective of global carbon dioxide emissions “accelerating at their fastest pace in seven years, hit[ting] a record high of 2.7% in 2018. Addressing the world's biggest sustainability issues requires collective leadership that exemplifies the behaviors that will bring about change and empower others to do the same.
“As well as driving changes in investment behavior through our data and insights, this also means caring about our own operational footprint, being open with our environmental commitments and disclosures and promoting a culture of transparency and inclusion that leverages the skills of our people to drive positive impact in our communities. As global citizens we need to act swiftly and decisively to help combat rising carbon dioxide emissions. We need to urgently do so not only for our futures, but for the future of our planet.”
Meanwhile, for the UN Task Force on Digital Financing, “having solid data on the sources, types and direction of funding flows is critical to our work,” said Tillman Bruett, director of the task force secretariat. “With Refinitiv's support, we hope to find opportunities in which small changes to investment criteria or incentives could shift investors and investments toward more sustainable outcomes.”
According to the UN, corruption, bribery, theft and tax evasion cost developing countries some $1.26 trillion a year. Money laundered from financial crimes such as human trafficking, bribery and fraud in one year is an estimated 2% to 5% of global GDP, or $800 billion to $2 trillion in current U.S. dollars.
“Refinitiv's mission is to lead the way as a sustainable, responsible business and use the power of its data and insights to help the global investment community shift towards sustainable investments,” said Luke Manning, the company's head of sustainability and strategic initiatives. “We are increasingly harnessing our core capabilities to drive positive social impact, being smarter with our resources and footprint, and balancing short-term considerations with long-term progress.”