The sustainability agenda and its implications for post-trade technology adoption

Environmental, social and governance (ESG), referring to the process of integrating ESG factors into investment decisions, and sustainable and impact investing, referring to the intent to deliver an environmental or social outcome on top of financial performance, are growing very rapidly. BNY Mellon and Aviva Investors reflected on implications for post-trade technology adoption. Rapid growth in demand is accompanied by increased expectations from a range of parties including regulators with a focus on disclosures and labelling, international institutions seeking greater alignment and lobbying groups asking for more data. All of this is affecting data to be sourced, controlled and reported, and reporting is complicated by lack of consensus on ESG definitions and difficulty in comparing data and incorporating investors' preferences across jurisdictions. Each party in the post-trade custody chain depends on reference data and needs access to the same accurate sustainability ESG reference data. Missing, different and inaccurate reference data creates errors and discrepancies. Sustainability data acquisition is thus becoming an emerging area of focus for post-trade servicing teams, particularly finding, formatting, correcting and monitoring updates and maintaining asset coverage, creating a shift in operating model. Technology is a critical enabler given the growing volume of data, lack of a single ESG definition and the need to prove product claims and support clients' preferences throughout the custody chain