In today's world, businesses are not just measured by their financial performance; they are also scrutinised for their environmental, social, and governance (ESG) practices. Investors, consumers, and regulators are increasingly demanding transparency and accountability from companies in these areas. To meet these requirements and build a more sustainable future, physical asset data plays a pivotal role. In this blog, we'll explore whyResponsible Capital’s physical asset data is crucial for ESG reporting and how companies can leverage it to comply with standards like the Taskforce onNature-Related Financial Disclosures (TNFD), the Sustainable Finance Disclosure Regulation (SFDR), the EU Taxonomy as well as conducting self-assessment or due diligence on ESG concepts.

The significance of physical asset data

Physical asset data refers to information related to a company's tangible assets, including infrastructure, machinery, real estate, and more. This data is vital for ESG reporting for several reasons:

●      Environmental Impact Assessment: Understanding the environmental impact of a company's physical assets is a key aspect of ESG reporting. This data allows companies to assess their carbon footprint, water usage, waste generation, and other environmental metrics.

●      Biodiversity and Natural Capital: TNFD emphasises the importance of biodiversity and natural capital in ESG reporting. Companies can use Responsible Capital’s physical asset data to evaluate how their operations depend on ecosystems and natural resources.

●      Resource Efficiency: Physical asset data helps analyse and disclose volume metrics like energy consumption, raw material usage, and waste production. It's a fundamental part of the EU Taxonomy, which provides criteria for environmentally sustainable economic activities.

●      Regulatory Compliance: SFDR, which aims to harmonise ESG reporting requirements across the EU, contains a number of Principal AdverseImpact (PAI) indicators which cover or can be generated from combining physical assets and spatial data. This includes PAI 7 on Biodiversity which requires financiers to measure the value of “activities negatively affecting biodiversity-sensitive areas” – this necessitates the overlaying of physical assets with spatial data such as protected areas.

Employing Responsible Capital’s Physical Asset Data in ESG Reporting

To meet the requirements of ESG reporting, companies can leverage our physical asset data in the following ways:

●      Environmental performance tracking: Use physical asset data to track key environmental metrics. This includes emissions data, energy consumption, water usage, and waste generation. Such data can be analysed to identify areas where sustainability improvements can be made.

●      Risk assessment: Evaluate the environmental and social risks associated with physical assets. This is critical for TNFD, which focuses on nature-related risks and dependencies. By understanding these risks, companies can take proactive measures to mitigate them.

●      Reporting and transparency: Create detailed ESG reports that include information on physical assets and their environmental and social impacts. These reports should align with the disclosure requirements set out by the SFDR and the EU Taxonomy.

●      Investment decisions and due diligence: Investors are increasingly considering ESG factors when making investment decisions. By providing comprehensive physical asset data, companies can attract ESG-focused investors and potentially reduce their cost of capital.

●      Sustainable innovation: Use physical asset data to identify opportunities for sustainable innovation. By understanding how assets impact the environment, companies can invest in emerging technologies and practices. 

Using Responsible Capital’s Physical Asset Data to Assist Compliance with the plethora of fast developing regulations

We can take a closer look at these standards where the application of Responsible Capital’s physical asset data will assist organisations to meet reporting requirements:

●      TNFD: TNFD emphasises the need for nature-related financial disclosures and how businesses impact and depend on nature. It encourages companies to assess their dependencies on and impacts on nature. By using physical asset data, companies can understand their role in preserving biodiversity and natural capital.

●      SFDR: The SFDR is an EU regulation that requires financial market participants to disclose ESG information. It mandates reporting on how investments consider ESG factors, including the environmental impact of assets. Companies can use physical asset data to fulfil these reporting requirements.

●      Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS): These both feature a number of requirements for corporates to disclose and financial institutions to analyse. These include E1: ClimateChange Mitigation, E2: Climate Change Adaptation, E3: Biodiversity andEcosystems and E7: Pollution amongst others.

●      EU Deforestation Regulation (EUDR): EUDR requires corporates, and increasingly financial institutions, to use spatial and physical assets data to identify and mitigate risks of deforestation in commodity supply chains.

●      EU Taxonomy: The EU Taxonomy sets out criteria for activities that qualify as environmentally sustainable. It involves analysing the environmental performance of assets to determine whether they align with the Taxonomy's requirements. Companies can use physical asset data to assess whether their operations and investments meet the Taxonomy's sustainability criteria.

●     Self-Assessment and Due Diligence: By using our physical asset dataset and our own internal tooling products, we are able to overlay spatial data on physical asset locations and look at the impact in its locality. For example with a mining asset, to examine the water discharge through the local river systems and how it impacts on natural habitat areas through which the rivers run.

Conclusion

Responsible Capital’s physical asset data is indispensable for ESG reporting, as it enables companies to measure and disclose their environmental, social, and governance impacts. To meet the requirements of standards like TNFD, SFDR, and EU Taxonomy, companies must collect, analyse, and report on this data. By doing so, they not only comply with regulatory requirements but also make more informed decisions, attract ESG-focused investors, and contribute to a more sustainable future. In a world increasingly focused on ESG, harnessing physical asset data is a vital step toward responsible and transparent corporate practices.

About Responsible Capital’s Physical Asset Dataset

Responsible Capital’s physical asset dataset has over 300,000 physical assets with associated metrics of production and capacity values, HS codes, GeoLocations, biodiversity impacts, operators and ownership.These key metrics enable meeting ESG requirements along with monitoring and screening investment universes. Responsible Capital is a product developed byNeural Alpha Ltd. Further details can be found at Responsible Capital and Neural Alpha | We build market leading ESG data products and analytics.