Development of digital ESG credentials for MSMEs underway

Date: 12 Jul 2023

Ashleigh John

MSMEs continue to face practical challenges when it comes to ESG reporting, but a new collaborative initiative aims to do away with these difficulties.

The United Nations Development Programme (UNDP), the Global Legal Entity Identifier Foundation (GLEIF) and the Monetary Authority of Singapore (MAS) has announced an initiative to develop digital ESG credentials for micro, small and medium-sized enterprises (MSMEs) worldwide, with the aim of facilitating ESG reporting in this sector. The UNDP, GLEIF and MAS will be consulting regulators, financial institutions and real economy corporations to refine the project’s scope and execution. This consultation process will culminate in a multi-jurisdictional proof of concept, which is set to launch at the 2023 UN Conference of Parties (COP28) in Dubai at the end of 2023.

 MSMEs continue to face practical challenges when it comes to ESG reporting, due to costs, lack of resources and expertise on sustainability reporting, and complexities around the multiple standards and reporting frameworks used around the world. The initiative, known as Project Savannah, will address these challenges by introducing a common framework of ESG metrics to enable MSMEs to produce basic sustainability credentials and thus be able to work towards meeting the UN’s Sustainable Development Goals. These credentials will form part of participating MSME’s Legal Entity Identifier records in the Global LEI system.

The UNDP, GLEIF and MAS have signed a Statement of Intent on the collaborative initiative and aim to support Project Savannah on three key fronts:

• Capacity building – In order to bolster MSMEs efforts to report ESG data, the UNDP and MAS will review and enhanced existing capacity-building initiatives. The UNDP, who already works with MSMEs globally on digitalisation and access to financing and integrating impact management and measurement practices, recognises the role that automated, data-driven digital solutions can play in driving scale.
• Simplified reporting – MAS will be deploying its ESGenome disclosure platform, which is currently co-piloted with the Singapore Exchange as part of Project Greenprint. The platform will serve as a digital reporting tool for MSMEs to populate the ESG metrics required to generate their basic ESG credentials. This move will enable MAS to leverage Greenprint’s partner network (AloT) and data capture solutions to pre-fill the metrics where possible, utilising verified data. This will also simplify and streamline MSMEs’ reporting processes and allow MAS to work with its partners to extend the capabilities to MSMEs at low cost.
• Accessible data – The ESG data collected will be recorded in, and made available by, the Global LEI System which provides a single global business identity behind every business. The System maintains the only worldwide online source of open, standardised and high-quality legal entity reference data. The use of the System will make the basic ESG credentials of MSMEs to be both trusted and accessible to authorised third parties based anywhere in the world. It will also ensure that the MSME is easily observable within the global product and service supply chains it participates in, thus satisfying an essential prerequisite of ESG reporting and analysis.

Aiaze Mitha, Global Lead Digital Finance & the SDGs, UNDP, said: “Addressing the global MSME financing gap in a way that also supports a greener, more sustainable economy, and ensuring that this sustainable transition leaves no one behind, is a key priority for UNDP. Project Savannah, in collaboration with MAS and GLEIF, will harness the potential offered by digital innovations to automate sustainability reporting for even the smallest SMEs, by overcoming existing barriers such as access to relevant data, cost, complexity, and capacity and knowledge gaps. This will play a significant role in ensuring that MSMEs are not locked out of sustainable finance and in supporting their green transition.”

Stephan Wolf, Chief Executive Officer, GLEIF said: “We strongly advocate the availability and usage of the LEI to support transparency in global sustainability initiatives such as Project Savannah. As a universal entity identification standard, the LEI brings myriad benefits to MSMEs everywhere, including fast and simple counterparty due diligence across borders, broader access to trade finance, and supporting compliance with a growing number of trade-related regulations. It has recently been recognised by international business influencers – the B20, Business in OECD, and IoE – as supporting the G20’s sustainability agenda. As the guardian of the Global LEI System, GLEIF enables responsible interactions between legal entities worldwide. We look forward to exploring how this open system can also be leveraged to support global ESG reporting by, for example, enabling access to varying ESG metrics and establishing a trust framework so that MSME ESG credentials can be relied upon.” 

Sopnendu Mohanty, Chief FinTech Officer, MAS, said: “Project Greenprint was conceived by MAS as a public-private initiative to explore how technology could be harnessed to drive more seamless origination and access to sustainability-related data. We are therefore pleased for Greenprint to collaborate with like-minded counterparts in UNDP and GLEIF to advance the goals of Project Savannah. Such collaboration will demonstrate the game-changing potential of technology in revolutionising the way MSMEs – the building blocks of every economy – tackle climate change while simultaneously lowering reporting burdens and supporting financial inclusion. In time, we foresee initiatives like Greenprint playing a crucial role in supplying verified private market and MSME data, to inform global efforts on charting more efficient pathways to a low carbon future.”

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