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Integration of ESG Data in the Financial Sector (Essential for Sustainable Investment and Risk Management)

Ashok Kumar Kalyanam

SME, Technical Delivery Lead

Email ID: ashok.kalyanam2020@gmail.com

ABSTRACT – The financial industry, Environmental, Social, and Governance data have lately become an important factor for responsible investment and good risk management. ESG data is a broad array of measures that include climate risk, corporate governance, labor practices, and environmental stewardship that financial institutions may use to assess the sustainability and ethical impact of their various investments. The article  addresses the importance of ESG data in underlining climate risks, informing decision-making, and keeping pace with global sustainability norms. It looks at the types of data collected, such as carbon emissions, diversity metrics, and board structure, and the methodologies of collection, including surveys, third-party databases, and IoT-driven monitoring systems. This article  further reviews portfolio optimization, credit risk, and the regulatory use of ESG data. Functional comparisons between some of the popular ESG tools prevalent in the market, which include Bloomberg Terminal, MSCI ESG Manager, and Sustainalytics, are made to give perception into how these different tools function. With this trend, based on ESG data insights, financial institutions will show better alignment with SDG goals, become more transparent, and minimize long-run risks for the development of a more sustainable financial ecosystem.

Keywords: ESG data, sustainable investment, risk management, climate risk, financial sector, ESG tools, methods of data collection, portfolio optimization, regulatory compliance, and sustainability.