Digitization of ESG Information and its Analysis · - XBRL Project Leader ... Corporate attitude to...

© 2019 NTT DATA Corporation

June 2019

Yoshiaki Wada

Member of the XBRL International Board of Directors

Chair of XBRL Asia Round Table

Senior Manager NTT Data

Digitization of ESG Information and its Analysis

© 2018 NTT DATA Corporation 2

About Myself

・ 1982~2010:

Worked for the Bank of Japan - Economic Research Department - IT Department - Bank Supervision Department - XBRL Project Leader

・ 2010~

Working for NTT Data Corporation as an IT Specialist - Building Regulatory Reporting System especially based on XBRL - Development of No-SQL DWH - Participating in Japanese Government’s ESG reporting project - Member of the Board of Directors of XBRL International, Chair for

XBRL Asia Round Table


Today’s Topics

ESG Information and Sustainability Finance/Investment

Issues on the use of ESG Information

Some use cases

DEMO

Towards future


Some Back ground Story



Sun-rising view from the top of Mt. Fuji


How to get to the top of Mt. Fuji?


ESG Information and Sustainability

Finance/Investment


Important 2 keywords(1)

SDGs

ESG



SDGs

Sustainable Development Goals

United Nation’s Development Program

Goals for Global Society



An universal call for action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity.

17 Goals, including climate change, economic inequality, innovation, sustainable consumption, peace and justice



ESG

Environment Social Governance

Factors for Corporate Value Evaluation

KPI for Investors


E : Environment Corporate attitude to cope with “Environment issues”

S : Social Corporate attitude to cope with “Social issues”

G : Governance Corporate attitude to cope with “Governance issues”

What is ESG?



What is the relation between SDGs and ESG?


Business Companies

Individual Persons

SDGs

Actions

Actions

Investors

Goals

Financial Information

Non-Financial Information

Investment

ESG

Pension Fund

PRI Principles Responsible Investment

Society



What is the relation between SDGs and ESG?

Business Companies

Individual Persons

SDGs

Actions

Actions

Investors

Goals



Investment

ESG

Pension Fund


Society

Eco-system for sustainable society



Business Companies

Individual Persons

SDGs

Actions

Actions

Investors

Goals



Investment

ESG

Pension Fund


Society

What is the the mechanism affecting decision making behind this system?

Anything IT can improve this process?

Business Sector

Citizens


In the Public Economics, there has been a popular argument, such as,

Internal Economy

VS

External Economy

And the previous discussion about the business behavior is deeply related to this argument.

Back Ground in the framework of Social Economics(1)


Market

Economic

Activities,

Measureable within

Market Mechanism

Internal Economy

Economic

Activities, Not

Measureable within

Market Mechanism

External Economy

Making External Economy visible in Market

mechanism

Ordinal business activities,

making visible profits

Public service, environmental pollution,

CO2 emission, resource wasting, etc.

Role of Non-financial Information: ESG


Potential to change the investors behavior



In the following sections, we are going to study the social mechanism which affects two important players, such as Business Sector and

Citizens, on their decision making process towards the Goals

and･･･

Study the possibility of IT to enhance these process


Issues on the use of ESG Information


Mechanism in Business Sector

Business Companies

SDGs

Actions Investors

Goals



Investment


Individual Persons ESG


Active Investment

Passive Investment

Investor’s Behaviorーーーan example(1)

Investment approach to realize better performance than the market average, using data analytics, algorism, etc.

Investment approach to obtain market average performance, such as market index.


Highly sophisticated, but not feasible case

動画

AI Super-

computer

Market- forecast

Can be a winner in the

market?

Big-data




Government Pension Investment Fund in Japan

Total asset $1.46 trillion

Biggest Pension Fund in the World


FY2001 FY2018

Active 49.93% 23.7%

Passive 50.07% 76.3%

Investment Trend in GPIF


Active Investment Passive Investment


Financial Factor

Non-Financial Factor

ESG Report, CSR Report,

Other public disclosed information

Why?

Non-Financial Factor



Lower interest era and investor’s headaches(1)

In the lower interest era, worst nightmare for investment manager is,

“Sudden death” or fatal incident of the company within their portfolio

Fund No.1: 1m USD

Fund No.2: 1m USD

Fund No.3: 1m USD

5%expected returns(1year later）

Fund No.1: 1.05m USD



Total 3m USD : Base fund Total 3.15m USD (+ 0.15m USD)

If Fund No.3 faces unexpected bankruptcy････



Fund No.3: all lost

Total 2.1m USD (-0.9m USD)

It takes 1 year to obtain 5% return, but takes less than 1 minute to loose all!

It is difficult to foresee these sudden death, based upon ordinary financial data


In the passive investment era, investors try to build some index compatible portfolio.


In order to get the expected return, potentially risky or less viable portfolio should be excluded.

How to find the hidden risks behind “financial information”?

But unfortunately, there are plenty of cases that company which financially seems viable, but suddenly run into fatal crisis.



There are “Sunny Days” and “Rainy Days” in Business Climate

There is no company free from unexpected events/change in business climate


What divides “Survivor” and “Looser”?

Awareness of Risks

Readiness for Changes in Business Climate

And ESG Report gives us the clue to evaluate these factors

Ability to alter the Risks to Business Opportunity

Three Important Factors to be checked


Why Corporate Value?

What is your familiar Japanese Company?

What is your Impression on Japanese Company?


Some bitter experience(1)

Disappointingly,

Corporate scandals revealed one after

another in Japan


Why these scandals were not revealed for a long time?

Is there any way to detect such a “deception” ?


Hint from one investor (1)

In order to get opinion on one of these cases, I visited some major investors in Japan.

And, I found an amazing response.


Hint from one investor(2)

“ We did not invest into that company’s stocks ”

“ Because that company has something un-natural ”

Is there any way to logically explain/systemize this “six

sense” ?

⇒ Then my long journey started


Relation between ESG and Business Value Creation

Business Value = Evaluated in Financial Information

Business Environment

G E S

Business Activities = Value Making Process


Relation between ESG and Business Value Creation

Business Value = Evaluated in Financial Information

Business Environment

G E S

Business Activities = Value Making Process

However, it is not easy to use Non-Financial Factor such as ESG

ESG tells not only literal “attitude” to each

factor but also implies business philosophy

behind the financial aspect


What is the problem with Non-Financial Reports?

Most of the Non-Financial reports are text type or non-structured data

Analysts must read them


One Possible Solution

AI/Digital data analytics

But computer is not Almighty


Financial Reports

Standardized /Structured

Comparable in Element base

Easy to be analyzed by Computer


Not-Standardized/Un-

Structured

Difficult to compare in Element base

Difficult to be read by computer

Non-Financial Reports


One more difficulty

Data format

In most cases, Non-Financial reports are published in HTML or PDF

But computer can’t understand these


is here!

eXtensible Business Reporting Language

Any solution?


そもそもXBRLとは

What is XBRL?

• XBRL（eXtensible Business Reporting Language）is a computer language based on XML, specially designed for business reporting of structured data

Able to describe data independent from system platform

Able to exchange data between different systems without manual process

• Originally XBRL was developed for financial data, and has been widely implemented as a de-fact standard for data exchange in the world


Taxonomy

Instance Describing the value of element=fact

Describing the attributes/structure of element

Company Name ABC Corporation

Period Start Date 1-Apr-04 End Date 31-Mar-05

Consolidated Balance Sheet Current Assets 723891

Cash and Deposit 307254 Notes Receivable and Accounts Receivable Trade 72422 Marketable Securities 97359 Inventories 36839 Prepaied Expenses 71891 : : : : : :

Computer can understand the structure, meaning of data, then

calculation, analytic

Data loading,

Feature of XBRL (eXtensible Business Reporting Language)

Attributes/structure

Elements


Taxonomy

Instance Describing the value of element=fact

Describing the attributes/structure of element

Company Name ABC Corporation

Period Start Date 1-Apr-04 End Date 31-Mar-05

Consolidated Balance Sheet Current Assets 723891

Cash and Deposit 307254 Notes Receivable and Accounts Receivable Trade 72422 Marketable Securities 97359 Inventories 36839 Prepaied Expenses 71891 : : : : : :

Computer can understand the structure, meaning of data, then

calculation, analytic

Data loading,

Feature of XBRL (eXtensible Business Reporting Language)

Attributes/structure

Elements

XBRL is the only one technology that conveys data value and attributes/structure information in the separate files.

It needs a little bit complicated data generation and reading process, but makes following unique features possible.

That is, Machine-readable and Machine-understandable data format

It can tell the computer the data and its definition at the same time


Major use cases of XBRL

Regulatory Reporting Central Banks, Financial/Security/Market

regulators

Financial/Non-Financial Disclosure

Business Report (e.g., IFRS other GAAP based), ESG Reporting

Tax-filing, Pension filings, etc. Governmental Filings

XBRL is already used as an de-facto standard for reporting in various cases, all over the world including all G20 countries.


1. Create standard/structured format for ESG Report

2. Create XBRL data dictionary, Taxonomy to digitize the report

How it works for ESG information?

3. Provide data analytic platform fitting for XBRL data

Important 3 steps


Standard format by XBRL

Item A : □□□

Item B : △△△

Item C : ○○○

Item D : □△△

：

：

：

：

Item Z : △□○

FY2014 CSR Report

Item A : □□□

Item B : △△△

Item C : ○○○

Item D : □△△

Item Z : △□○

XBRL

Item A : ○□□

Item B : △□△

Item C : ○△○

Item D : □□△

Item Z : ○△□

Item A : ○□□

Item B : △□△

Item C : ○△○

Item D : □□△

：

：

：

：

Item Z : ○△□

FY2015 CSR Report

XBRL

Easy to compare items in different year


Example of Text Analytics(1)

2016 2015 Donec id elit non mi porta gravida at eget metus. Fusce

dapibus, tellus ac cursus commodo, tortor mauris condimentum

nibh, ut fermentum massa justo sit amet risus. Etiam porta sem

malesuada

Donec id elit non mi porta gravida at eget metus. Fusce dapibus,

tellus ac cursus commodo, tortor mauris condimentum nibh, ut

fermentum massa justo sit amet risus. Etiam porta sem

malesuada

Donec id elit non mi porta gravida at eget metus. Fusce



malesuada




malesuada




malesuada




malesuada




malesuada




malesuada




malesuada




malesuada



2016 2015




malesuada




malesuada

Similarity:86%



2016 2015




malesuada




malesuada

Donec id elit non mi porta gravida at eget metus. Fusce dapibus, tellus ac cursus commodo, tortor mauris condimentum nibh, ut fermentum massa justo sit amet risus. Etiam porta sem malesuada magna mollis euismod. Donec sed odio dui. Donec id elit non mi porta gravida at eget metus. Fusce dapibus, tellus ac cursus commodo, tortor mauris condimentum nibh, ut fermentum massa justo sit amet risus. Etiam porta Donec id elit non mi porta gravida at eget metus. Fusce dapibus, tellus ac cursus commodo, tortor mauris condimentum nibh, sit amet risus. Etiam porta sem malesuada magna mollis euismod. Donec se

Donec id elit non mi porta gravida at eget metus. Fusce dapibus, tellus ac cursus commodo, tortor mauris condimentum nibh, ut fermentum massa justo sit amet risus. Etiam porta sem malesuada magna mollis euismod. Donec sed odio dui. Donec id elit non mi porta gravida at eget metus. Fusce dapibus, tellus ac cursus commodo, tortor mauris condimentum nibh, ut fermentum massa justo sit amet risus. Etiam porta sem malesuada magna mollis euismod. Donec sed odio dui. Donec id elit non mi porta gravida at eget metus. Fusce dapibus, tellus ac cursus commodo, tortor mauris condimentum nibh, ut fermentum massa justo sit amet risus. Etiam porta sem malesuada magna mollis euismod. Donec se

Text DIFF


Computer power for document analytics

If the Report is recorded in a structured, standardized and machine readable format, such as XBRL, then text mining becomes easy, without super computer.

① Which part of the report has been changed from the previous year?

② Any changes in the frequency of negative word/positive word?

③ Any changes in the management policy when new CEO comes?

④ Any acknowledgement by the company of the critical changes in its business environment?

⇒ Especially in the case 3 and 4, if there is no significant changes in the report, that provides

crucial clue to evaluate the business attitude of that company

However, the availability of XBRL formatted Non-financial report is still limited.


Some use cases


The world’s first initiative that has succeeded in the acquisition and analysis of the environmental information as well as in direct communication at a practical level

Case in Japan----Environment Report in XBRL (1)


Environmental Reporting Platform enables companies and investors to

actively communicate on environmental information disclosed by the

companies.

Communication tool provides chatting function and helps investors and

companies to easily access to person in charge mutually.

Analysis support tool provides file download function (XBRL to Excel) and

helps investors and companies to analyze registered information.


© 2018 NTT DATA Corporation 57 57





Case in Japan----Environment Report in XBRL (5) A scene on group matchmaking


Case in Japan----Environment Report in XBRL (6) Registered investor’s profile





DEMO


Towards future


Individual Persons

SDGs

Actions

Investors

Goals

Pension Fund

Mechanism in Non-Business Sector

How to motivate people/society to start actions for better future


Issues to be overcome

How to digitize/visualize unstructured information

There is a very tough issue to be solved

That is ･･･


http://oi.nttdata.com/en/contest/

One trial to change the world

http://oi.nttdata.com/en/contest/challenges/

http://oi.nttdata.com/en/contest/


NTT DATA Open Innovation Contest

Tel Aviv

Madrid

London

San Francisco

Toronto

Singapore

Sao Paulo

Tokyo

Barcelona

Guiyang

NTTDATA UK

Mumbai

Melbourne Santiago

Milan

Lisbon

NTTDATA Italia

NTTDAT Australia

NTTDATA Singapore

NTT DATA Services

• Regional contests in 15 cities • “Grand Finale” in Tokyo


Gland Winner in 2017



Social Coin’s motivation

There are so many social issues happening all over the world

So many voices coming from society, but people do not have a courage to take forward step to rescue/help people in trouble

Is there any possibility to change this situation by using IT solutions?


Evaluation Reword Citizens’

participation Finding Issues

Search the social issues by Natural

Language Analytics and AI

Specify the important issues and

inform the participants via

mobile APPs

Reword the people by paying Social Coin, who engaged in the good deeds to cope with social issues

Evaluate the outcome by the

people’s actions and engagement

Model of Social Coin(1)

AI Natural Language

Analytics

Crypt Currency based

on Block Chain AI


Model of Social Coin(2)


Ultimate goal of Social Coin (1)

Individual Persons

SDGs Actions

Goals

Citizens in need of

help/rescue/assistance

Message,

voices, tweets

Sensing

Notifying

Action sharing, & evaluation

Rewording

Analyze/classify


Summary

Recent trend toward more sustainable society leads to SDGs and both business sector and individuals are required to take necessary actions

On the other hand, computer/AI needs digitized information for efficient analytics.

ESG is becoming important information set for people to make decision and computer/AI is expected to play an important role to support human activities

Well structured ESG data is still limited and global collaboration to standardize the non-financial information is needed.


Thank you for your attention!

© 2019 NTT DATA Corporation

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