Diving Deep to Bridge the ESG Gap with Data

Aria Goudarzi is a committed environmentalist and data enthusiast who serves as the Senior Vice President of ESG Data at a prominent financial institution.

Aria Goudarzi’s passion for nature was ignited by his adventurous spirit and love for the oceans. But it was here that he first witnessed the extent of ocean pollution and the destruction it has wrought on marine life.

These experiences inspired him to use data to bridge the gap between idealism and practicality when it comes to addressing the impact of humans on the planet.

“As a diver, I’ve witnessed first-hand the devastating impact of pollution on our oceans and marine life. It’s not just a local issue; it’s a global crisis,” Goudarzi says.

The turning point in Goudarzi’s career came with the introduction of the Sustainable Finance Disclosure Regulation, which required more stringent reporting on key environmental, social and governance (ESG) metrics.

As financial firms started taking their ESG responsibilities more seriously, Goudarzi was able to ride the wave of his previous experience to surface as a leader in ESG data initiatives.

“My passion for ESG stems from my love for adventure, a desire to connect data with real-world impact, and the opportunity to drive positive change in the financial sector,” he says.

Navigating the ESG Ocean

In his role, Goudarzi emphasises the critical importance of understanding both internal needs and external offerings.

By initiating a robust two-pronged approach involving internal discovery and external research via requests for information, his team effectively categorised varying team needs, ensuring alignment with new datasets and vendors.

He also realised that his teams weren’t only fishing for raw data.

“I realised that my initial assumption—that everyone just wanted raw data—was incorrect. Teams had varied needs, with some preferring research or already computed scores, while others leaned towards raw data for their proprietary models,” he recalls.

This meticulous approach was pivotal in crafting a comprehensive and adaptive ESG data strategy that identified specific goals for different phases, like regulatory reporting, investment integration, and alpha generation.

Leveraging AI for ESG

Artificial intelligence has the potential to revolutionise ESG data management. Some of the most significant advancements made possible by AI are efficient data extraction from unstructured data sources, enhanced data quality, and being more context-aware.

What’s more, tools like large language models (LLMs) allow for more intuitive and in-depth analysis of sustainability reports, streamlining the process and providing rich insights for decision-makers.

“There are LLMs that allow users to digest large volumes of sustainability reports using natural language prompts,” he says. “Analysts can ask questions in plain language to gain a better understanding of the reports or data they’re analysing.”

Avoiding ESG as a ‘Box-Ticking Exercise’

To prevent ESG reporting from becoming merely a box-ticking exercise, Goudarzi advocates linking ESG initiatives back to practical use cases.

“We need to establish clear links between ESG activities and their real-world impacts,” Goudarzi says. Especially on fiscal performance and tangible sustainability goals.”

According to Goudarzi, the practice of ‘ESG fluffing’, using impressive-sounding ‘green’ jargon in reports that are not backed by hard data, can be avoided with clear, concise, and standardised reporting templates.

Ensuring reports are easily digestible and genuinely reflective of the company’s ESG efforts will encourage more active use of reports, leading to increased engagement and, ultimately, more significant investments in producing meaningful ESG reports.

Integrating Non-Financial ESG Data

Goudarzi’s approach to integrating non-financial ESG data with traditional financial data revolves around examining a company’s commitment to its ESG goals.

Ensuring a clear link between a company’s resource allocation towards its ESG commitments and its financial data is essential for a comprehensive understanding of a company’s overall performance.

“If there’s a disconnect between the company’s ESG goals and resource allocation, it could raise a red flag and warrant further investigation, as it could indicate potential greenwashing,” Goudarzi explains.

This holistic approach allows for a more thorough assessment, helping to identify potential greenwashing and ensuring that companies are genuinely committed to their ESG goals.

Aria Goudarzi’s ESG voyage is a beacon of his commitment to drive positive change in the financial sector and the world at large.

His strategic and thorough approach to ESG data management and his emphasis on collaboration, transparency, and technological advancement, are charting the course for a more sustainable and environmentally conscious future in finance and beyond.

This article was featured in the first Edition of our Driven by Data Magazine. You can download the magazine and read more articles like this by clicking here.