Over the last two years the Bank of England, the G20 Financial Stability Board (FSB), and European Systemic Risk Board, among many other respected institutions, have all highlighted how a late and abrupt transition to a low carbon economy could have implications for financial stability. They have emphasised the need to pre-emptively manage ‘stranded asset’ risk in financial institutions and throughout the financial system as a whole. They have also highlighted how that without better data this will be extremely challenging. Correcting this major gap is now an urgent priority.
Evolution of Sustainability Data
Sustainability data is used to asses the risk caused by environment-related factors, like the physical impacts of and social responses to climate change. As the importance of these environmental factors has increased, the availability and use of sustainability data has become more sophisticated.
Different groups have different sustainability data needs. Asset managers seek to evaluate the environmental performance of companies; Asset owners evaluate the environmental performance of funds run by asset managers; Savers decide where to invest their capital and retirement savings; Regulators monitor the financial system and the accumulation of systemic risk; Policymakers ensure capital is flowing at sufficient scale and pace to deliver the transition to sustainable global economy; Civil society organisations hold policymakers, companies, and others to account for their actions. The information these different group require can all be drawn from a single asset-level data ‘building block’. Asset-level data is information about physical and non-physical assets tied to company ownership information.
Mission & Objectives
ADI is a new non-commercial research-based initiative to support the bringing together of existing asset-level data with new sources of data. The mission of ADI is it to make accurate, comparable, and comprehensive asset-level data tied to ownership information publicly available across key sectors and geographies. The ADI has three objectives:
- Drive the use of asset-level data
- Improve access to asset-level data
- Enhance the quality of asset-level data
It will support efforts to collect, verify, and distribute asset-level data on all companies in key sectors globally, regardless of whether they disclose or not. This information would enable the assessment of asset, company, asset manager, asset owner, and system-wide exposure to a wide range of environmental factors in a granular and comparable way. Such datasets will enable new value added analysis, from academics and civil society through to consultants and service providers. In the absence of perfect reporting by companies ADI is critically important for integrating the environment into decision-making across the financial system.
ADI is being created by four core partners. Additional partners will join the ADI as consortium, affiliate, or supporter members as the ADI develops.
ADI is a ‘structured network’ – a much needed layer that sits above existing organisations to coordinate work; collect and distribute data; and make the case for asset-level data – ADI is not be a new legal entity, but a project run as a consortium between partner organisations. ADI will shortly appoint an advisory board consisting of partners, funders, and other relevant stakeholders and this board will meet regularly to guide its work and priorities.
By demonstrating coordination among organisations, particularly in terms of harmonised workflow and funding bids, ADI will increase the attractiveness of funding work on asset-level data. There are significant benefits of building ADI through well-established entities with proven track records and there are also potential economies associated with not creating a new organisation.