ESG Key to Reputational Risk Program

RDC is a purpose-built organization founded on a single principle: to fight financial crime. This fight is dynamic and evolving because criminal methods of stealing money and government regulations are dynamic and evolving.

Lately I have heard from our customers a desire to incorporate Environmental, Social, and Governance (ESG) issues to enhance our financial crime screening products. Interestingly, RDC employees are asking for more ESG awareness from our own operations as well.
Let me be clear—neither RDC nor our customers see following ESG guidelines as a box-ticking exercise. We believe incorporating them not only enables our customers to follow their compliance responsibilities, but they create real value for shareholders and a greater societal impact.

Governments and regulating bodies are increasingly mandating more ESG-focused disclosures. ESG-related thinking must now be woven into a company’s daily processes and activities. Furthermore, the current COVID-19 pandemic has put financial institutions, corporations, and governments on notice to be more transparent in their approach to the health and well-being of their employees, suppliers, and clients.

Far from being a regulatory burden, however, we hear from clients that there is empirical evidence that shareholder value is increased when ESG programs are emphasized. As McKinsey pointed out earlier this year, a strong ESG program is linked to short- and long-term value creation in five distinct ways: top line growth, cost reductions, regulatory interventions, productivity uplift, and asset optimization. Reputational risk is also very important and taking on clients with poor ESG behavior can hurt the accepting organization.

RDC’s coverage of ESG inputs is not new. Our approach has been carefully honed and continues to develop. Our internal ESG Council reviews standards and filters to make sure we stay ahead of emerging ESG topics and related illicit activities.

We focus on key sectors and markets which are of greatest importance to our customers and we monitor others that might build steam. Examples of sectors that we are closely monitoring include Defense (weapons and military technology) and Chemicals given the governmental role in both and connections to State Owned Entities (SOE). We are currently introducing deeper coverage around SOEs through our work with our new parent company, Bureau van Dijk (BvD), which will be a boost to our customers.

RDC is also staying ahead on the ever-evolving ESG regulatory front. We have seen a more than doubling in ESG-related regulations and requirements in the past year in the EU, UK, US, and Canada among other markets.

In our mission to keep the financial markets secure and trusted, ESG considerations are no longer a “nice to have” but rather a key component to a robust compliance and reputational risk program. As was recently pointed out by the Harvard Business Review, “[c]ompanies need to see [ESG disclosure] as an opportunity for continual reputation and relationship building” and most are not there yet as “[t]oo many companies have embraced a ‘box-ticking’ culture.”

I am proud to say that RDC and BvD see our ESG coverage as anything but box-ticking. We work closely with our customers to create coverage that bolsters their ESG insights and protects their institutions and reputations.

Please let us know if you’d like to learn more.

Tom