Monthly Archive for March, 2020

Launch of first machine learning ESG Sustainability Rating Model

Launch of first machine learning ESG Sustainability Rating Model

Dr Anushka Bogdanov MD of Risk Insights and Mr Lebogang Malekutu

Confirmed list of our panel members


Conscious Leadership has become so imperative to keep our world intact. From East to West, from developing to developed countries corporates drive the economic welfare of any state. They set the standards of doing business, influence governments when it comes to standards of conducting the business, create governance measures, define the wealth of a nation and showcase a country’s leadership capital.  Many corporates are failing to have any or exercise little real accountability to its outside stakeholders, i.e. employees, trade unions, societies where they operate, pension funds, and even to their own debt and shareholders.  (E)Environmental (S)Social (G) Governance accountability will force corporates to disclose initiatives to achieve more than just financial returns. Conscious leadership will drive values that create conscious capitalism.

Regulators are frustrated with failed companies and continue to impose penalties, warnings and onerous compliance measures. Corporate disclosure on financial and non-financial risk is critical for investors, trade unions shareholders, millennials and society at large that want to verify that brands and companies are responsible in keeping the planet safe and intact for future generations. The need for conscious corporates has given rise to impact investing and lending trends. Several prominent pension funds, asset managers and banks have begun placing huge emphasis on investing in sustainable investments. As ESG concerns are highlighted in mainstream and social media. The trend towards sustainable investments by prominent investment and pension funds will continue.

ESG ratings will impact the risk profile of a company over time due to cost of capital and cost of funds being an important financial factor when valuing or lending to a company thereby influencing  the Net Present Value (NPV) or Expected Loss (EL) calculation going forward. This ultimately means that credit granting, and investment processes will be affected accordingly. Risk appetite of investors and lenders will consider ESG as substantial factor with major impact on the pricing for the companies.

Climate change is a severe risk that humanity is facing, and it is imperative that all corporations measure, monitor and reduce their impact on this catastrophic risk that faces the planet. South Africa has suffered the aftermath of apartheid which still appears to be contentious. The ability to measure diversity and inclusion in corporations is a critical risk factor. Human capital and resource management which forms part of ERM will need to ensure a company’s diversity management strategy is inculcated top down and bottom up. Reporting on diversity management is critical as it is a mitigation towards, acts of war, terrorism and xenophobia and gender-based violence. Governance has failed in South Africa both in private and public sector resulting in a loss of public and investor confidence. Transparent reporting on governance structures is critical.  It is of utmost importance that South African companies move from a tick box exercise to fundamental disclosure on ESG and sustainability reporting.

There is has been uncertainty on how, what to measure when it comes to ESG…

Risk Insights Sustainability Rating Model has been created and bespoken to the South African environment. This model is based on AI and takes reporting complexity into a measurable and attainable sphere for all listed corporations. Join us on the 23rd of March, Risk Insights will unveil our Sustainability Ratings Model for South Africa at the Johannesburg Stock Exchange.