ESG finance guide:

Unlock the value of

your reporting
ESG — not just
for sustainability
officers!

When ESG first emerged, reporting was

under investor relations or sustainability
management’s umbrella. But, as you know if
you’ve landed here, that’s changed. Regulatory
requirements are around the corner, which
means ESG compliance will soon fall squarely
on the shoulders of finance.

While ESG is yet another addition to finance’s

overflowing plate, we see this as a good thing:
Finance is the most equipped and most savvy
This eBook is for anyone looking to gain clarity on how to
in performance management — which is what approach ESG reporting, its impacts on organizations, and the
ESG truly is. (More on this revelation to come!) best way to manage growing ESG demands.

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What you’ll learn
by reading this eBook:

ESG is a corporate performance management process 04

Back to basics: What is ESG? 06

Why ESG is important for organizations 07

How ESG reports are used 09

ESG reporting frameworks and requirements 11

The business case for ESG reporting software 12

ESG software options 13

Food for thought when choosing ESG software 15

Final thoughts: Critical ESG software capabilities 16

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ESG is a corporate performance management process
Wait — ESG is performance management? It sure is. You might have thought ESG was just compliance, or just reporting, or “just” making the
world a better place.

And ESG is all these things. But it’s so much more.

ESG is an interdepartmental process that relies heavily on financial processes to meet end-goals, like improving business practices, gaining
positive favor with investors, and complying with regulatory rules.

ESG involves financial processes:

Centralized data collection Planning, budgeting, forecasting Close and consolidation

Supply chain planning Real-time KPI monitoring Capital planning

Profitability analysis and

Monthly, quarterly, and annual reporting Regulatory disclosure
Cost containment

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ESG is a corporate performance
management process

What does this mean for you and your

finance team? Let’s go back to the ESG
basics to better understand ESG, how
ESG reports are used, and how finance
can set organizations up for long-term
ESG success.

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Back to basics: What is ESG?
ESG reporting is the disclosure of environmental, social, and corporate governance performance. Its purpose is to shed light on a company’s
ESG initiatives while improving transparency for investors and comparability between competitors. It also holds markets accountable for its
impacts on the planet and its people.

ESG reporting is an effective way to demonstrate that your organization is meeting its targets — and not just greenwashing, making empty
promises, or performing lip service.

ESG reports include qualitative and quantitative information on three key topics.

Environmental Social Governance

Reducing carbon emissions People and workplace culture Internal control

Preserving biodiversity Gender, BIPOC, and LGBTQ+ inclusivity Executive compensation

Improving air and water quality Community involvement Audit committee structure

Responsible waste management Human rights and labor standards Political contributions

Responsible resource use Ethical supply chains Whistleblower programs

What are you doing to be a steward of What are you doing to improve lives, What are you doing to stay ahead of
the environment? foster community, and make a positive corruption, hold leaders accountable,
social impact? and ensure investments remain
sustainable in the future?

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Why is ESG important for
organizations?
Compliance
Emerging ESG regulations and frameworks require changes to data collection,
consolidation, disclosure management, and planning processes.

Reputation
ESG performance influences your reputation among investors, consumers, the
market, banks, and regulators. ESG reputations now impact investing decisions,
access to financing, and stock prices.

Risk
ESG factors, like climate change, represent material risks that can impact the viability
of your company.

Impact
By monitoring ESG KPIs and understanding how ESG performance connects to
operations and finance, you can optimize ESG initiatives and do better for the planet
and its people.

Performance
ESG can positively or negatively impact your bottom line. Solid ESG performance
management can enable you to identify business opportunities, underperforming
projects, and areas of investment or divestment.

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“Recent data suggests that ESG-related funds outperformed the
markets over the first quarter of the year — when the COVID-19
economic crisis started. The MSCI World ESG Leaders Index, for
example, outperformed the regular index by 1.36 percent on
the quarter. Seventy percent of responsible investment funds
outperformed their peers in the first quarter.”
Stephen J. Hall,
Partner, Financial Risk Management, KPMG

https://home.kpmg/xx/en/home/insights/2020/05/embedding-esg-into-banks-strategies.html

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How are ESG reports used?
By internal stakeholders
Department heads, operational leaders, finance teams, and chief executives can benefit from ESG data. By connecting ESG data to financial and operational data,
internal stakeholders can unearth insights that inform critical business actions. (For example: ESG insights can direct finance teams to improve profitability, contain
costs, identify new business opportunities, improve their company’s reputation, and recognize areas of investment and divestment.)

By investors What is ESG investing?

ESG investing is a strategy investors use to ensure their money goes to companies
Investors screen investments to align investments to their values. ESG investors would
making the world a better place. ESG investing relies on independent ratings,
avoid companies that risk damaging the environment, disrupting lives, or are vulnerable
known as an ESG score, that’s given based on an assessment of a company’s
to corruption.
environmental performance, social impact, and governance policies.

By ESG scoring bodies What is an ESG score?

ESG scores grade organizations on their ESG efforts. Like a credit score or a bond
Third-party providers calculate ESG scores based on metrics and reported ESG performance.
rating, an ESG score demonstrates a company’s ability to meet its ESG commitments,
Notable ESG scoring organizations are Bloomberg ESG Data Services, Sustainalytics, ESG Risk
performance, and risk exposure.
Ratings, JUST Capital, MSCI, Refinitiv, Dow Jones Sustainability Index Family, and RepRisk.

By banks and financing bodies

Banks, capital markets, and wealth managers are moving towards ESG agendas. They direct customers towards ESG investments, loans, products, and services. An
organization’s ESG performance could directly affect a bank’s willingness to renew loans, approve financing, and offer support.

By insurers
Research indicates that the overwhelming majority of insurers monitor ESG. Some insurers have even limited coverage and investments in certain sectors due to ESG
considerations.

By regulators
Across jurisdictions, regulators are finalizing new rules that will require companies to disclose their ESG footprint in their annual reports and regulatory filings. How
disclosures will be evaluated is still to be determined but you can bet it will involve an evaluation of your reports.

By consumers
Consumers use ESG reports to inform their purchasing decisions. ESG reports give consumers an idea of a company’s values and whether they’re aligned.

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“Like the movement of the tectonic plates, shifts in the operating
environment for business have been slow but relentless. Boards
and C-suites that can get ahead of ESG disclosure regulation can
build a business that meaningfully integrates ESG into its strategic
planning and is better poised to manage risks, while also delivering
shareholder value and increasing their organizations’ resiliency in a
changed world.”
Deloitte Insights

Source: https://www2.deloitte.com/us/en/insights/topics/strategy/esg-disclosure-regulation.html

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What are ESG How are ESG reports used?
The EU Taxonomy provides standard definitions for what’s considered environmentally

reporting sustainable to prevent greenwashing, incentivize sustainable activities, and funnel investments
towards sustainable organizations.

frameworks and The Sustainable Finance Disclosure Regulation (SFDR) standardizes the way organizations
disclose sustainability risks, strategy, goals, and ESG impacts to investors. SFDR became effective

requirements? in March 2021.

New Corporate Sustainability Reporting Directive (CSRD) lays out disclosure rules for non-
financial and diversity information for large companies. CSRD came into effect on February 1,
2022.

Everyone from the G7 Finance Ministers

Voluntary standards
and Central Bank Governors to the IFRS,
the International Organization of Securities In many regions, ESG disclosure is voluntary. But to improve ESG scores, comparability, ease of
Commissions, and the SEC has expressed reporting, and trust, many opt to use recognized frameworks. Here are just a few:
a move towards mandatory disclosure and Global Reporting Initiative (GRI) helps companies disclose both the positive and negative impact
standardization. While it appears regulators their business has on the environment, the economy, and society.
are doubling down on creating a globally The Sustainability Accounting Standards Board (SASB) helps companies collect and share ESG
harmonized set of disclosure standards, data that affect the firm’s business decisions and explain the financial impact of sustainability.
they’re not quite there yet. The Task Force on Climate-related Financial Disclosures (TCFD) provides principles-based
The EU has the most mature ESG regulations, recommendations for managing and reporting on climate risks.
developed to help increase sustainable
investing and further the EU Green Deal. Additional frameworks

Carbon Disclosure Project (CDP)

Streamlined Energy and Carbon Reporting (SECR)

The Workforce Disclosure (WDI)

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Why use ESG reporting software?
ESG isn’t a passing trend. Reporting requirements and the applications of ESG data insights will only grow in the future. Here’s how software can
prepare you for a future that prioritizes ESG.

Data management Stay in line with Keep tabs on Analyze opportunities Ensure trust
changing frameworks performance and risks
ESG information is ESG shouldn’t just be about The overarching goal of
often scattered around As investor demand for ESG How can you tell if you’ll investor relations. Software ESG reporting is to safe-
organizations in siloed reporting data reaches a fe- hit your targets? Many ESG can enable you to leverage guard your reputation by
systems and spreadsheets. ver pitch, regulatory bodies initiatives are spearheaded ESG data as a source of bu- serving the greater good.
As such, aggregating ESG will respond accordingly by by a specific department siness insights for invest- Not just having ethics but
data from far-off people issuing new requirements or line of business, which ment, divestment, compe- being known as ethical. At
and applications can and updating immature fra- complicates KPI monito- titive opportunity, and cost the core of good reporting
be time-consuming and meworks. Software removes ring. Software can provide management. is data integrity. Software
erroneous. Software can the burden of compliance you with the automation to ensures you’re using accu-
save you time and ensure by adjusting consolidation, monitor and respond to re- rate information that’s tra-
accuracy by automatically templates, and calculations al-time ESG KPIs, empowe- ceable and auditable.
collecting and formatting so they’re in line with chan- ring you to act if you’re fal-
data, and providing ges. The software handles ling behind.
mechanisms to standardize the reporting updates, so
instances of manual entry, you focus on making your
like data entry forms. ESG initiatives successful.

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ESG software options

Companies can take a few different

approaches to ESG management. Any
software is better than no software, but
not all methods are created equal.

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ESG software options

Standalone, bolt-on ESG software Governance, risk, compliance Health and safety software Existing reporting software — Integrated performance
software repurposed through customization management software (CCH
Tagetik)

Installation Quick, simple Long, complex Long, complex Very long, very complex Instant, simple

Originally created for Sustainability professionals Compliance and IT professionals Supply chain and risk management The office of the CFO The office of the CFO + supply chain,
teams risk, HR, and operational planners

Purpose ESG reporting and analysis Add-on GRC applications that cover Purpose-built solutions for Extending existing reporting End-to-end solutions that cover
ESG reporting and analysis specific issues (worker safety, software to cover ESG reporting financial processes, close and
pandemic response, hazardous needs through a process of IT- compliance, regulatory disclosure,
waste, chemical/air/emissions intensive coding reporting and analysis, and
management) now with an ESG integrated business planning
reporting component

Treatment of compliance Vendors sometimes updates Vendors provide the means to Vendors provide the means to Changes and updates take IT's time Vendor automatically updates
updates content, templates, KPIs, and update, but IT needs to program update, but IT needs to program and effort to re-script/re-code the content, templates, KPIs, and
calculations to comply with new/ software changes to attain software changes to attain software calculations to comply with new/
updated requirements as they're compliance compliance. updated requirements as they're
issued issued

Ideal use case ESG reporting Specific audits and inspection Specific audits and inspections ESG reporting ESG performance management
is designed for ESG reporting,
consolidation, compliance,
disclosure, analysis, and planning

Connects ESG performance No No No No Yes

to financial outcomes and
operational activities

Prepackaged compliance Yes Sometimes Sometimes No Yes

with ESG frameworks and
regulations (GRI, SASB, EU
taxonomy)

Option to add custom ESG Some solutions offer functionality Some solutions offer functionality Some solutions offer functionality No Yes – with a simple configuration
KPIs for custom ESG KPIs. Others require for custom ESG KPIs. Others require for custom ESG KPIs. Others require through an easy-to-use, guided
custom coding custom coding custom coding interface

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Food for thought when choosing
ESG software

ESG isn’t just reporting. ESG involves consolidation, planning,

analysis, disclosure management, and regulatory compliance too. It’s
a performance management process.

ESG doesn’t just involve sustainability professionals, supply chain

planners, risk managers, or investor relations associates alone.
ESG involves finance, senior executives, operations, HR, and project
managers together.

ESG isn’t just due diligence. ESG can be a profitability strategy, aid
in cost containment, and contribute to an organization’s long-term
viability.

ESG isn’t going anywhere. ESG will only become a greater priority for
investors, regulators, and the public.

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 Closing thoughts
ESG is an enterprise-wide initiative that involves numerous perspectives,
people, processes, and systems. At its core, it’s a performance management
process. Organizations should develop a foundation for ESG performance
management through software that:

• Connects ESG performance to finance and operational departments

• Centralizes ESG monitoring, planning, reporting, and compliance

• Sets the stage for growing ESG demands in the future

Looking for software that takes a performance management approach to ESG?

Use this handy checklist to help you determine critical ESG reporting software capabilities.

Download the checklist

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About
CCH® Tagetik
expert solution

Part of the Wolters Kluwer group, a global

For more information about
leader in professional information, software
our solutions and organization,
solutions and services, the CCH® Tagetik expert
solution is a strategic and financial intelligence visit our website.
platform that empowers global enterprises
to make informed decisions — faster. Its
proven corporate performance management
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