Alveo and Cognizant recently collaborated to offer a joint ESG offering to help financial institutions operationalise their ESG data. In a Q&A with DerivSource, reps from both Alveo and Cognizant share how firms can address common challenges with the sourcing, integration and completion of ESG data and create a better data ops workflow capable of supporting regulatory disclosure requirements and meeting the rising demand for ESG investments.
Q. Can you briefly share why now was a great time to forge this collaboration and jointly offer this ESG data solution?
Alveo: There is industry and investor demand to better integrate ESG data into all aspects of decision making. At the same time, there are regulatory disclosure requirements impacting financial services firms in the near future.
Cognizant: With ESG governance and aspirations now forged, focus within financial services cli-ents is firmly on bringing the technology components supporting those commitments and ac-tions to life. Data is at the heart of ESG, and forms part of a here-&-now problem. The first hur-dles of SFDR Sustainable Finance Disclosure Regulation (SFDR) have been addressed, but the next ones are on the horizon and adherence is a necessity. Our solutions allow for adherence, whilst allowing financial services clients to also differentiate their offerings.
Q. Can you briefly explain the data solution on offer and specifically how it helps operationalise ESG data?
Alveo: Alveo’s ESG Data-as-a-Service (DaaS) solution includes sourcing of ESG data sets through off the shelf integration with data providers, the mastering through cross-referencing and like for like comparison data quality management. It also detects discrepancies, gaps and outliers, data access and distribution and operationalizes all data to make it readily available to business users and provides them with the capability to integrate into business processes. Alveo’s data integration and data analytics track record is combined with Cognizant’s data operations and technology services to support the onboarding and management of Alveo’s ESG Data-as-a-Service (DaaS) solution.
Cognizant: Building on Alveo’s comments, our joint solution enables an automated mesh-up of data – this matters, for both speed and cost. Given our complementing strengths and the pre-fabricated nature of our solution we can do this rapidly (i.e., in months, not quarters). The open & API led architecture will allow us to grow our solution further with Cognizant’s broader eco-system of partners e.g., MS FI, Service Now, and other emerging ESG Regtechs, etc.Q. What challenges (amongst both firms and the industry at large) will this data offering address and how?
Alveo: Challenges addressed include the sourcing, integration and completion of ESG information to be used in investment decision making, capital allocation, client reporting and regulatory requirements.
Operationalization of this data through providing easy access to users through browsers, APIs and embedding into user workflows.
Cognizant: We share Alveo’s passion for Data Quality. We would like to make ESG data easy to decipher so good decisions can be made. The regulators will ultimately create consequences for poor execution and clients will lose time in contributing to ESG causes. Normalisation and the mastering of data are very important in successful investing, capital allocation and reporting.
Q. What are the main benefits a client firm would expect to achieve in year one after implementing the data solution? Is there a competitive advantage to be had with the use of such a solution?
Alveo: Absolutely it will be a competitive differentiator. Apart from the ESG reporting all firms will have to do themselves, they will need to include the ESG impact and aspects of the activities they perform for their customers. Better availability and quality of ESG information has use cases ranging from investment management, corporate lending, retail finance, supplier management to risk management.
Cognizant: In the first year, our ESG solution will ensure clients are a) generating more Alpha for their clients b) are better aligned with the investment mandates their customers have assigned them, and c) will be doing so for substantially less expense than if they had chosen a “do-it-yourself” strategy. These are certain outcomes and differentiated outcomes. And unabashedly, we are excited to do our part for ESG and to help our clients engineer modern businesses to improve everyday life.
Q. Can you explain how the data solution can address and comply with current and upcoming ESG related regulations including SFDR and the EU taxonomy regulation?
Alveo: SFDR includes 18 mandatory PAI as well as optional fields asset managers selling their products in the EU need to report on as of 2023. The EU taxonomy outlines various business classification that larger corporates will need to report on. All these fields and classifications are supported in Alveo’s data models, however current availability of some of the PAI in SFDR is patchy and will require multisource combined with internal assessment and aggregation. Alveo’s consolidation functionality easily allows the aggregation of individual source data in complete Golden Copies.
In addition, as we have seen data quality, controls and transparency requirements evolve over time in other regulations such as Solvency II and FRTB, this will happen for ESG as well. Alveo is successfully used for financial and risk reporting by the most heavily regulated institutions in the world and is already prepared for these stricter requirements, for example with data quality intelligence, full audit trails, data lineage, and bi-temporal access to data.
Cognizant: For those firms still non-compliant with SFDR, or those looking to move a more robust and standardised solution for fulfilling their obligations, our joint solution is able to support all critical elements of decision making (i.e., underlying data) with ease. As the regulations extend our solution will be pre-configured to off these “out of the box”.
Q. What role does data standardisation play in the current and future use of your data solutions? How can the existing solution address a lack of market-wide standards today?
Alveo: Alveo’s solution includes the cross-referencing of various data sources to a common data model. Alveo’s data model has been extended to cover ESG information from available data sources as well as external reporting requirements. Other than the SFDR there are different other reporting standards that are accommodated.
Cognizant: Echoing Alveo’s – the joint solution targets the heart of data standardisation – it recognises the shortcomings that are inherent in ESG ratings, and helps firms resolve those according to their policies, outlooks and/or criteria. Rather than having to build a new solution or rely on a third party who does the aggregation of data it allows financial services clients to use the data streams they already subscribe to, and then normalise and create a golden copy of the ESG rating they feel is appropriate.
Q. How will you continue to keep the data solution in line with this rapidly evolving space? What is the next step for this collaboration?
Alveo: A benefit of the partnership is that we can now marry the highly scalable and extendable Alveo technology with the vast resources and experience Cognizant brings to the table. The very reason the partnership makes sense to Alveo is that we realized that this space is rapidly evolving and that we would need help to scale properly if we were to take advantage of the growing but shifting conditions. By offering this through the Cognizant delivery capability, we can now service many more customers, focus on advancing the current ESG solution, while our partner delivers integration, business intelligence and a point of view which will help clients operationalize their ESG data assets.
Cognizant: There is much more to come from us jointly as a pair. ESG is the focus at outset, as we feel that is where tempo and pace for data solutions will be substantial and can be complemented by Cognizant broad service offerings and Alveo’s heritage for excelling in EDM.
Cognizant has a responsibility as both a firm, and in the support of its financial services clients to make demonstrable progress against ESG commitments. Our joint goal is to make ESG easy, accessible and cost effective for our clients. For example, you’re a wealth manager or leader in brokerage and want to integrate ESG decisions into your App, but also want clients to be able to challenge that rating (but carry no overhead) – great – we can bring our ESG Data Marketplace together with our research or business process operations capabilities to investigate, resolve and respond. Find divergent ratings and want to put an entity on a watchlist for Adverse Media Notification in context of ESG? – achievable as part of our service, and easily extensible and scalable. It is these adjacent and complementing capabilities that we are most excited, as it will allow our clients to differentiate themselves, whilst doing good.
Contributors:
Alveo Spokespeople:
• Martijn Groot, VP Marketing & Strategy, Alveo
• Boyke Baboelal, Strategic Solutions Director Americas, Alveo ,
• Nathan Wolaver, MD – Americas, Alveo
Cognizant spokesperson:
• Robert Benyo, Risk & Compliance Solution & Platform Architect at Cognizant
