In a dynamic business environment where Environmental, Social, and Governance (ESG) considerations are gaining increasing prominence, Permutable AI, a leading AI-driven analytics firm, is at the forefront of the conversation.
The recent announcement by S&P regarding their decision to exclude ESG indicators from their credit reports has ignited discussions on the need for standardized ESG ratings. Permutable AI’s CEO, Wilson Chan, and Manuela Moollan, Regional Director for Asia, have shared their perspectives on this crucial matter.
Why ESG Ratings Matter
Wilson Chan, CEO and Co-Founder of Permutable AI, emphasized the significance of ESG ratings, stating, “ESG ratings play a pivotal role in holding companies accountable for their environmental and social impacts. They are guiding beacons for investors and drive businesses towards more sustainable practices.”
The Challenge of ESG Rating Diversity
Discussing the challenges surrounding ESG ratings, Chan added, “The lack of uniformity and standardization in the ESG rating landscape is a formidable challenge. This diversity of interpretations makes it exceptionally challenging to compare one company’s ESG performance with another’s.”
The Case for Regulatory Standardization
Permutable AI firmly believes in the necessity of regulatory standardization. Wilson Chan stated, “ESG ratings should not originate solely from private entities. Instead, regulators and governmental organisations should be at the forefront of establishing a unified and transparent standard. Standardization is paramount because it provides a level playing field for businesses, ensures the reliability of ratings, and facilitates more accurate comparisons.”
Reliability and Transparency of Permutable AI’s Data
A distinguishing factor of Permutable AI’s approach is the real-time and progressive nature of their data. Wilson Chan highlighted this, saying, “Unlike rating agencies, our data is real-time and shows progress over time. This real-time insight allows businesses and investors to track ESG performance and improvements continuously.”
The Role of South East Asia in Standardization
Manuela Moollan, Regional Director for Asia at Permutable AI, discussed the regional perspective, stating, “In South East Asia, regions such as Hong Kong and Singapore are actively developing principles for climate transition plans and green taxonomies to support standardization efforts. These initiatives mark a significant step towards regional alignment with international ESG standards.”
She continues, “Since the ASEAN’s sustainable finance taxonomy publication in 2021, ASEAN countries have been developing their own taxonomies to be interoperable with international standards. Taxonomies are key to reduce divergence and inconsistencies in ESG ratings. With standardization in mind, ESG data providers and ESG ratings will be at the forefront of risk evaluation in the banking sector and determining capital requirements to reflect ESG risk.”
S&P’s Decision and Permutable AI’s Unique Perspective
Commenting on S&P’s recent decision to temporarily withdraw ESG ratings, Wilson Chan remarked, “This move is prudent. It acknowledges the significant variance between different rating providers and underscores the importance of reliability in ESG ratings. Reintroducing ESG ratings once standardized and reliable frameworks are in place would be a sensible course of action.”
