Economy

CLEAR Info project promotes sustainable investment

Published

11 years ago

May 15, 2014

Contributor

Suzanne Laidlaw from the Environment Agency writes about a new initiative that uses environmental data to inform investment decisions.

The CLEAR Info project (Company Level Environmental Accountability Reporting and Information) is a partnership project 50% funded by European commission LIFE+ and led by the Environment Agency of England. This partnership involves leaders in sustainable investment, business information and environmental data and regulation from across Europe:

– Environment Agency of England
– Trucost
– European Sustainable Investment Forum (Eurosif)
– University of Southampton
– Finland Ministry of the Environment
– UK Department for Environment, Food and Rural Affairs (Defra)

As a demonstration project, CLEAR Info aims to show that integrating site data efficiently to parent company and geographical level can not only transform disparate site and subsidiary data into influential information to enable informed engagement between the regulator and regulated companies, but that it also has the potential to increase compliance with EU legislation by informing and influencing investment decisions.

Why CLEAR Info is needed

Historically, the Environment Agency designed data systems to store compliance data as and when new legislation came into force. The result is that a potentially powerful set of data on environmental impacts are held in isolated, disconnected data sets which make it difficult to see the environmental performance of a site across regulatory regimes or to assess the potential environmental impact on a geographical area. To compound the situation further, the data held relates to around 500,000 businesses, many of which are subsidiaries owned by global parent companies based in over 30 different countries.

The issue is quite clear – a disjointed approach to data management is a missed opportunity to identify where best to target resources to protect the environment and people, to influence where businesses should take action, and to help inform where investments are made.

The CLEAR Info project aims to address this problem by developing a data integration system which brings together parent company information on business performance with environmental compliance data to:

– Compile better information on parent company environmental performance
– Generate information from environmental data which can be used to influence investment decisions in the finance sector
– Drive improvements in the quality, efficiency, access to and exchange of data and information

Parent company engagement

By matching company data with environmental regulatory data, CLEAR Info has created a powerful tool which could enable an environmental regulator to work in a smarter, more consistent way with its customers.

By aggregating data consistently, and mapping this information against company hierarchy, we’ve developed a system which allows us to generate bespoke reports– enabling us to engage with companies at a parent company rather than site level. Looking at a company from this perspective, we can identify systemic rather than site issues, and highlight corporate risks and opportunities to manage environmental performance better.

By bringing environmental performance into the boardroom, we aim to encourage investment in those areas where environmental improvements are needed most.

The first iteration of parent company reports has been piloted with three listed companies representing the food and drink, chemical pharmaceutical and waste industries. The feedback from the first round of engagement will be used to improve the accuracy and relevance of parent company reports and to evaluate the effectiveness of this type of engagement.

Informing investment decisions

In addition to maintaining good quality compliance data on parent company performance to support the Environment Agency to reduce corporate environmental impact, the CLEAR Info project aims to demonstrate the benefit of environmental data integration into investment strategies.

Project partners Trucost recently published a report for investors to help achieve better risk adjusted returns through managing their portfolio environmental risks. The analysis focused on operational risk appraisal data (OPRA), which is an Environment Agency published site level environmental score that covers 170,000 UK business sites.

Trucost undertook preliminary steps to demonstrate the value of incorporating environmental data into active and enhanced passive investment strategies through three data integration case studies. The first uses OPRA scores to inform environmental sector profiles that include information on operational emissions, environmental management and compliance. The second helps inform engagement by identifying companies and engagement themes through comparing companies’ OPRA scores against sector averages developed in sector profiles. The third demonstrates OPRA score’s suitability to inform an environmentally enhanced index, which is aimed at investors seeking to slightly outperform the market and promote environmental sustainability.

Improving corporate environmental performance

As an EU-funded project, a large degree of effort is focused on sharing the project learning with other European regulators, acting as a catalyst for them to use integrated data and novel interventions as a way of driving compliance with EU legislation.

Over the next few months, the CLEAR Info project team will continue to work with environmental regulatory representatives from Finland, the Netherlands, Holland, Denmark, Spain and Portugal to explore opportunities and obstacles to sharing data across regulatory boundaries, taking the first tentative steps towards developing a pan-European view of corporate environmental performance.

CLEAR Info will make an important step towards having data and information that reflects the sophistication of regulated business, enabling regulators to use it to influence the environmental performance of businesses operating within the UK, across Europe and ultimately, globally.

Suzanne Laidlaw is CLEAR Info project manager from the Environment Agency, England. For further information, please email CLEAR.Info@environment-agency.gov.uk.

Photo: Marija Gjurgjan via freeimages