ESG Digital Transformation for Material Sustainability Impact Webinar Presentation

©2021 TechIPm, LLC All Rights Reserved www.techipm.com
ESG Digital Transformation
for
Material Sustainability Impact
August 11, 2021
Alex G. Lee

©2021 TechIPm, LLC All Rights Reserved
I. ESG Sustainability Imperative
-ESG Sustainability Management & Investing Imperative
-ESG Management Status
-ESG Investment Status
-ESG Management/Investing Consideration Core Factors
-ESG Reporting Frameworks & Guidelines
-ESG Reporting Trends to Watch in 2021
-Resolution Agenda for ESG Sustainability Metrics
II. Sustainability Impacts
-Sustainability Impacts Management: UN SDG IMPACT STANDARDS
-SDG Sustainability Impacts Assessments
*Invited speaker: Belissa Rojas, impact measurement and management lead at UNDP SDG Impact Team
-Sustainability Impact Awards
-Sustainability Impact Assessment Solution
-Sustainability Impact Assessment for S&P 500 High-Tech Industry
-SDG-SASB-GRI-WEF ESG Metrics Mapping
*Finscience's Investment AI for Alternative ESG Score for enterprises sustainability impact assessment
III. ESG Digital Transformation
-ESG Digital Transformation (DX) Imperative
-ESG DX for Business Innovation & Growth
-ESG DX Forum
-ESG DX Solutions for Metrics Digitalization & Reporting Automation Exploiting Existing IT/Digital Technology
System
-ESG DX Solutions for ESG Sustainability Analyses
-Cloud Base Integrated ESG DX Platforms
*Next Generation ESG solutions for innovation in sustainable enterprise/investing/development
Agenda

Belissa Rojas (https://www.linkedin.com/in/belissarojas/)
impact measurement and management lead at UNDP SDG
Impact Team & founder and CEO at Impacto
As Impacto’s founder and CEO, Belissa provides leadership in the growth, outreach, and partnerships of Impacto. She focuses
primarely on strategic planning, general management, sustainability, and impact measurement and management. She has over 15
years of experience in the development sector, advising private-sector companies, impact investors, development banks, and
foundations on how to professionalize their management and measurement practices.
Belissa currently works as an advisor to several investors on how to measure and manage their impact. She is working with IDB Lab
on the design of an ESG & impact measurement and management (IMM) platform for early-stage ventures with the potential to
generate impact on a large scale. She is an advisor to the Impact Management Project’s Impact Frontiers, co-leading an initiative to
support venture capital funds in the adoption and continuous improvement of their IMM practices. She is also leading an initiative with
On Think Tanks (OTT) and International Development Research Centre (IDRC) to bring cross-sector knowledge, policy, and
economic expertise from local think tanks to the impact investing industry in Latin America and Africa.
Previously, Belissa was a Strategy & Monitoring Senior Specialist at IDB Invest, where she led the design and implementation of IDB
Invest’s Impact Management Framework post due diligence and was responsible for the impact oversight of its operations—
investments and loans. She was responsible for overseeing and leading the reporting of a portfolio of +250 operations valued at
approx. US$11 billion. While at IDB Invest, she also led the design and launch of the Impact Lessons Learned site, which included an
evaluation of IDB Invest’s entire portfolio, independent verification of all final evaluations, and identification of best practices. She won
two corporate awards for her contributions in strengthening IDB Invest’s Impact Management Framework.
Prior to this work, Belissa was the Counselor for Peru and Chile at the Board of Executive Directors of the IDB Group. As a former
consultant for Emerging Markets Group (formerly Deloitte Emerging Markets) and the World Bank, Belissa also acquired extensive
experience in evaluating public sector operations and corporate projects. Belissa started her career working in the Ministry of Finance
of Peru and the Peruvian Regulatory Agency for Banks, Insurance and Pensions.
Invited Speaker for Sustainability Impacts

ESG
Sustainability Imperative

ESG Sustainability Management & Investing Imperative

ESG Management Status
https://globescan.com/unilever-patagonia-ikea-interface-top-
sustainability-leaders-2020/

ESG Investment Status
Source https://www.spglobal.com/marketintelligence/en/news-
insights/latest-news-headlines/esg-funds-outperforming-in-
pandemic-employees-return-to-new-normal-in-offices-58808348
Source GSIA Global Sustainable Investment Review

ESG Management Consideration Core Factors
Source: Bradley, Brendan. ESG Investing For Dummies, Wiley (2021)
Opportunities (Return) Risks (Cost)
Impacts (Value Creation)
universal risks
(e.g., climate change)
industry specific risks
business specific risks
ESG issue specific risks
(e.g., Environmental
physical/transition/liability
risks)
market competitiveness
better placed to win investment
rise of company value
return on reputation
employees' better performance
regulation compliance
business resiliency
circular business model
increase positive impact
limit negative impact

ESG Investing Consideration Core Factors
Source: Bradley, Brendan. ESG Investing For Dummies, Wiley (2021)

Carbon Disclosure Project (CDP): www.cdp.net/en
Climate Disclosure Standards Board (CDSB): www.cdsb.net
Global Real Estate Sustainability Benchmark (GRESB): https://gresb.com
Global Reporting Initiative (GRI): www.globalreporting.org
International Financial Reporting Standards (IFRS) Foundation https://www.ifrs.org/
International Integrated Reporting Council (IIRC): https://integratedreporting.org
International Organization for Standardization (ISO): www.iso.org
Sustainability Accounting Standards Board (SASB): www.sasb.org
Task Force on Climate-related Financial Disclosures (TCFD): www.fsb-tcfd.org
United Nations Sustainable Development Goals (SDGs): https://sdgs.un.org
United Nations System of Environmental Economic Accounting (UNSEEA): https://seea.un.org
World Business Council For Sustainable Development (WBCSD) ESG Disclosure Handbook
https://www.wbcsd.org
World Economic Forum (WEF) ESG Reporting Metrics and Disclosure Standards https://www.weforum.org
ESG Reporting Frameworks & Guidelines

The risk in ESG investing is the difficulty in measuring how well a company is doing with ESG
issues because of a lack of standard terminology. Leading ESG standards organizations have
declared their intent to collaborate to develop ESG Standards . The IFRS Foundation is forging a
path toward a global common language for sustainability .
Financial market participants are now required to make mandatory ESG disclosures: EU
Sustainable Finance Disclosure Regulation (SFDR). The requirements are designed to make it
easier for investors to make informed investment decisions, improve industry-wide
comparability, and prevent greenwashing (a false impression or misleading information). The so-
called level-1 disclosures must be complied with as from March 10, 2021 . Asset managers must
publish on their websites information about their policies on the integration of sustainability
risks in their investment decision-making process or their investment advice or insurance
advice . They must also provide information on certain features of financial products that promote
environmental or social characteristics.
On June 16, 2021, the U.S. House of Representatives voted to pass the ESG Disclosure
Simplification Act of 2021 (H. R. 1187) that is build on the Biden Administration’s push for major
corporations to be more transparent in disclosing economic and social risks to investors, including
climate-related risks. The Act require the Securities and Exchange Commission (“SEC”) to
define, in regulations, “ESG metrics,” for the purpose of guiding required corporate
disclosures under the Securities Exchange Act of 1934 and the Securities Act of 1933, as
amended.
ESG Reporting Trends to Watch in 2021

ESG metrics need to be standardized.
ESG metrics need to be made less complex and more clear, relevant, consistent, reliable,
comparable, and informative.
ESG metrics need to be cost-effective for performance measurements.
ESG metrics need to assess real-world impacts on a company due to sustainability risks.
ESG metrics need to be designed to measure a company’s resilience to sustainability risks.
ESG metrics need to capture business/industry/jurisdiction-specific material sustainability issues.
ESG metrics need to provide a reliable foundation for cross-company comparisons.
ESG metrics need to track and assess a company’s success in delivering sustainability-derived
values (sustainability impacts).
ESG metrics need to be made a basis for assessing likely future performance (forward-looking
assessment).
ESG metrics need to be accessed based on standardized measurement (and data gathering)
methodology to ensure consistency and comparability of metrics.
Resolution Agenda for ESG Sustainability Metrics

Appendix

Demo video Link: https://www.youtube.com/watch?v=iZB-U0zrzr8
Topic modeling for ESG knowledge map development
Text summarization for ESG trend analysis
Text analytics & classification for opportunity/risk/impact scoring using internal
information (ESG reports) & external information (SEC reports, earning calls)
ESG scoring with respect to Stock earnings & volatility analysis
Sentiment analysis for Greenwashing detection
Semantic sentiment search & analysis for advanced ESG performance rating
- Controversial activities detection
- Supervised learning for ESG classification via auto-labeling regarding
business/industry/jurisdiction-specific materiality determination and
performance scoring
AI Applications for ESG Management and Investing Demos

ESG Knowledge Map

Source. https://www.mckinsey.com/business-functions/sustainability/our-insights/bringing-
discipline-to-your-sustainability-initiatives
How to Determine Materiality?

Source. https://materiality.sasb.org/
SASB Materiality Map

ESG Performance Score - Materiality Comparisons Across Industries

ESG Performance Score - Materiality Comparisons Across Jurisdiction

Top 3 Industry-Specific SDG Impact based on ESG Materiality
Source. https://www2.deloitte.com/content/dam/Deloitte/my/Documents/risk/my-risk-sdg12-sustainability-risk-management.pdf

Sustainability Impacts

UN SDG IMPACT STANDARDS Enterprises: Integrating impact management
into Enterprises’ decision-making to optimize their contribution to sustainable
development and the SDGs
UN SDG IMPACT STANDARDS Private Equity Funds: Impact management
for Private Equity, Debt and Venture Capital Funds committed to contributing
positively to sustainable development and achieving the SDGs
UN SDG IMPACT STANDARDS Bond Issuers: Integrating impact
management into Bond Issuers’ decision-making to optimize their contribution
to sustainable develop
Sustainability Impacts Management

SDG Sustainability Impacts Assessments

Sustainability Impact Corporate Awards (SICA)
Sustainability Impact and Sustainable Development Goals (SISDGS) Initiative (https://sisdgs.org/)
will host an awards commencement event in best practice of UN SDG sustainability impacts
management on August 21 (https://sisdgs.org/awards-ceremony). Participating companies will be
given one of the two types of awards during the Awards Ceremony:
Sustainability Impact Corporate Performance
Enterprises with remarkable effort in integrating sustainable management into business operation.
Sustainability Impact Corporate Excellence
Enterprises with significant effort and intense commitment in putting forward sustainability impacts.
TTI Global Impact Awards
Top Tier Impact (TTI) Group (https://www.toptierimpact.com/) will host an awards commencement
event to give recognition to the most impactful innovators in sustainability worldwide on August 17
(https://www.toptierimpact.com/impact-awards/ceremony). The ceremony is taking place in a virtual
environment, where can interact live with the avatars of all attendees (metaverse).
Awards Categories: Agriculture & Foods, Consumer & Retail, Financial Services, Education &
Media, Energy & Environment, Healthcare & Wellbeing, Sustainable Cities & Real Estate, Diversity
& Inclusion
Sustainability Impact Awards

Sustainability Impact Assessment Solution
A company
A Com.

Sustainability Impact Assessment for S&P 500 High-Tech Industry

SDG-SASB-GRI-WEF ESG Metrics Mapping

FinScience ESG AI Solution Details

HBR(https://hbr.org/2021/01/esg-impact-is-hard-to-measure-but-its-not-
impossible?fbclid=IwAR2PAJaIjEC9GNaX2ZUDclWZGa0rjbV7UE5NWyqj4b1vtPkUyTJW4krcLRM)
“Many ESG measures already very effectively capture inputs, but they presume causality — that adding women
to top management teams, say, will produce better outcomes. But measures that capture inputs (such as the
numbers of women on those teams) don’t capture outcomes (such as decision-making that reflects diverse
perspectives) and impacts (such as the social value created by such decisions). “
Three ways that can widen a company’s focus to capture information not just about inputs but also about the
processes and systems governing outcomes and impacts.
1. Zoom in to develop insights on processes
To grasp underlying processes, companies should focus on deeply understanding a handful of issues most
germane to their core activities. Through this, they stand a greater chance of deeply understanding the causal
threads that enable improved impact, and ultimately directing sufficient resources to act on these.
2. Zoom out to see broader systems
Zooming out brings a longer term and broader perspective on issues that demand deep insight. Beginning with the
end state and soliciting diverse stakeholder inputs are two approaches to understanding systems and one’s role
within them.
3. Value curiosity and learning
Many people are calling for firms to articulate a purpose beyond profit maximization, so that they can better serve
societal values. But purpose is empty without the capacity to execute on it. Getting started with focused “doing” is
a more grounded — and potentially complementary — approach that can leverage existing capabilities and talent.
ESG Impact Is Hard to Measure — But It’s Not Impossible

Global assessment of countries' progress towards achieving the UN
Sustainable Development Goals (https://dashboards.sdgindex.org/rankings)
National UN SDG Performance Ranking

ESG
Digital Transformation

ESG digital transformation (DX) refers to the integration of the digital
technology into all domains of ESG to transform sustainability management,
sustainable investing, and sustainable development in innovative ways .
ESG Digital Transformation (DX) Imperative
https://www.weforum.org/agenda/2018/05/how-technology-is-
driving-a-fourth-wave-of-environmentalism
https://www.weforum.org/agenda/2021/03/here-s-how-digital-
transformation-and-sustainability-can-flourish-together/

ESG DX enables effective integration of ESG sustainability into business
strategy, model, and operations based on data-driven material ESG
risks/opportunities/impacts assessment across supply and value chain.
ESG DX enables ESG sustainability data informed decision-making to lead an
ESG sustainable company.
ESG DX enables ESG sustainability data gathering and sharing for sustainable
development of innovative products/services and their manufacturing/providing.
ESG DX enables ESG sustainability serve as a growth engine by innovating
company’s operations, products and services, as well as creating new revenue
streams.
ESG DX enables automation of ESG sustainability performance measurement
and reporting process.
ESG DX for Sustainable Business Innovation & Growth
Source. https://www.weforum.org/agenda/2021/03/here-s-how-digital-transformation-and-sustainability-can-
flourish-together/

Forum for ESG + digital transformation (DX) integrated management for
sustainability impacts & digital technology innovation for sustainable
development acceleration.
LinkedIn Group: https://www.linkedin.com/groups/8956651/
Facebook Group: https://www.facebook.com/groups/822562128365739
ESG DX Forum

Source. https://docs.wbcsd.org/2019/06/WBCSD-Internal-Control-Guidance.pdf
ESG DX Solutions for ESG Information Governance

ESG DX Solutions for Metrics Digitalization & Reporting
Automation Exploiting Existing IT/Digital Technology System
Source. Efraim Turban; Carol Pollard; Gregory Wood. Information Technology for Management: Driving Digital Transformation to Increase Local and Global Performance, Growth and Sustainability,

ESG sustainability analyses need to consider business/industry/jurisdiction-specific
material context.
ESG sustainability analyses need to include sustainability maturity and forward-
looking assessment in a company.
ESG sustainability analyses need to be dynamic and time-sensitive to capture the
momentum and turnaround of sustainability management.
ESG sustainability analyses need to adopt scenario analysis to understand a variety of
potential future internal and external states.
ESG sustainability analyses need to quantify real-world impacts of sustainable
development generated by an investee company.
ESG sustainability analyses need to consider whether ESG integrated investing can be
a source of generating alpha (achieve above-market risk-adjusted returns relative to a
standard benchmark).
ESG sustainability analyses need to provide ESG risk + opportunity + impact analysis
for integrated ESG rating.
ESG DX Solutions for ESG Sustainability Analyses

Digitalization of ESG management processes, including strategy, information
management, monitoring, task management, innovation management, and
disclosure management
Cloud Base Integrated ESG DX Platforms
Source. Samsung SDS Sustainability Report 2021
External Views
Internal Views ESG Integration
ESG Performance
Sustainability Impacts

AI Blockchain IoT for ESG Digital Transformation AT A Glance

ESG Cybersecurity & Privacy

ESG Cybersecurity & Privacy Reporting Standard
SASB (Sustainability Accounting Standards Board) Materiality Map - Social
Capital: https://materiality.sasb.org/
Customer Privacy Data Security
GRI (Global Reporting Initiative) Standards: https://www.globalreporting.org/
GRI 418: CUSTOMER PRIVACY

Global Standard for Reporting Cybersecurity & Privacy
Source: White paper on Cyber Resilience “ESG” Reporting (https://www.swissre.com/institute/research/topics-
and-risk-dialogues/digital-business-model-and-cyber-risk/cyber-resilience-esg-report.html) based on UN PRI
Stepping Up Governance On Cyber Security (https://www.unpri.org/download?ac=5134)

Cybersecurity & Privacy Reporting Standard Development
Transparency for stakeholders
Community information sharing for preventing other similar events
Based on data for objectively measurable performance and avoiding
greenwashing
Inclusive for up/down supply chain & business partners
Just enough disclosure details not to be exploited by adversaries
CISA Cyber Resilience Review + NIST Cybersecurity Framework

Thank you!

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ESG Digital Transformation for Material Sustainability Impact Webinar Presentation