AI, ML-based rating tool helps investors with sustainability risk insight
ESG (environmental, social and governance) data analytics company, Risk Insights, and communications firm Instinctif Partners have launched ESG GPS Nigeria, touted as the West African country's first AI and machine learning ESG rating tool, developed by Africans for Africa.
The developers add that ESG GPS is based on global standards and bespoke to the country's laws, regulations, and best practices.
Anashrin Pillay, Acting CEO of Risk Insights, says, "ESG GPS uses machine learning and artificial intelligence to process unstructured data with structured financial information to provide a rating to a listed corporate. Risk Insights ESG GPS tool considers voluntary and mandatory disclosure, negative news feeds, change in share price, market capitalisation and PE ratios over a period to rate a company. The rating model shows a strong correlation between company disclosure and sustainability. As the world moves into a new era of climate change reporting, taking all stakeholders into account, Africa has its tool that considers the African dynamics of the country's laws and its people. We believe that this rating tool will assist the Nigerian economy drive towards sustainability as companies continue to improve their disclosure. Our tool will enable greater transparency, accountability, and sustainability, enabling corporates in Nigeria to attract impact investments and lower the cost of funds. Conscious capital considering society and the environment together with governance is critical for this new era of governance."
According to a statement from the companies, the ratings are based on TF-IDF scores that are completely independent and can be used by investors, corporates and other stakeholders to identify key ESG risks and opportunities for listed NGX counters.
The Risk Insights ESG database and platform is enriched with data for all listed companies on the NGX, rated by sector for a particular financial year. As companies integrated reports are published together with other voluntary and mandatory reports, ESG GPS uses an algorithm to gather and rate institutions. The retrospective rating provides a forward view of the companies' sustainability. ESG rating and disclosure reporting are embedded into strategy and not a point in time statistic.
Temi Popoola, CEO, Nigerian Exchange, comments, "ESG factors have become a critical aspect of the investment decision-making process. However, the prevailing challenges of inconsistency, incomparability and lack of alignment in standards of ESG reporting frameworks present the most significant concern for investors in their quest to access decision-useful ESG investment data. For us at NGX, we are committed to fostering the growth of ESG reporting across our ecosystem.”
“By unveiling the NGX Sustainability Disclosure Guidelines in 2019, we provided a consistent approach for investors to access ESG data from issuers listed on NGX. Risk Insights has taken this a step further by building the first ESG machine learning and AI tool for Africans. We welcome the application of this innovative solution in improving Sustainable, Responsible and Impact (SRI) in Africa and look forward to reaping the benefits of improved allocation of capital to support Africa's sustainable development and transition to a low carbon economy."
Pillay adds: "Sustainability, as a business imperative, continues to increase in importance.Targets, such as the 2030 Agenda for Sustainable Development and Net Zero by 2050, highlight the growing demand for attention in the transition to greater sustainable development.Our ambition is to support countries across the African continent, ensuring the African continents ability to compete on the global stage.”