digitization of esg information and its analysis · - xbrl project leader ... corporate attitude to...
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© 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
© 2019 NTT DATA Corporation 3
Today’s Topics
ESG Information and Sustainability Finance/Investment
Issues on the use of ESG Information
Some use cases
DEMO
Towards future
© 2019 NTT DATA Corporation 4
Some Back ground Story
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Sun-rising view from the top of Mt. Fuji
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How to get to the top of Mt. Fuji?
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ESG Information and Sustainability
Finance/Investment
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Important 2 keywords(1)
SDGs
ESG
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Important 2 keywords(2)
SDGs
Sustainable Development Goals
United Nation’s Development Program
Goals for Global Society
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Important 2 keywords(3)
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
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Important 2 keywords(4)
ESG
Environment Social Governance
Factors for Corporate Value Evaluation
KPI for Investors
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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?
Important 2 keywords(5)
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What is the relation between SDGs and ESG?
Important 2 keywords(6)
Business Companies
Individual Persons
SDGs
Actions
Actions
Investors
Goals
Financial Information
Non-Financial Information
Investment
ESG
Pension Fund
PRI Principles Responsible Investment
Society
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Important 2 keywords(6)
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
Eco-system for sustainable society
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Important 2 keywords(6)
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 the mechanism affecting decision making behind this system?
Anything IT can improve this process?
Business Sector
Citizens
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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)
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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
Back Ground in the framework of Social Economics(2)
Potential to change the investors behavior
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Back Ground in the framework of Social Economics(3)
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
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Issues on the use of ESG Information
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Mechanism in Business Sector
Business Companies
SDGs
Actions Investors
Goals
Financial Information
Non-Financial Information
Investment
PRI Principles Responsible Investment
Individual Persons ESG
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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.
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Highly sophisticated, but not feasible case
動画
AI Super-
computer
Market- forecast
Can be a winner in the
market?
Big-data
Investor’s Behaviorーーーan example(2)
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Investor’s Behaviorーーーan example(3)
Government Pension Investment Fund in Japan
Total asset $1.46 trillion
Biggest Pension Fund in the World
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FY2001 FY2018
Active 49.93% 23.7%
Passive 50.07% 76.3%
Investment Trend in GPIF
Investor’s Behaviorーーーan example(4)
Active Investment Passive Investment
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Financial Factor
Non-Financial Factor
ESG Report, CSR Report,
Other public disclosed information
Why?
Non-Financial Factor
Investor’s Behaviorーーーan example(5)
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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
Fund No.2: 1.05m USD
Fund No.3: 1.05m USD
Total 3m USD : Base fund Total 3.15m USD (+ 0.15m USD)
If Fund No.3 faces unexpected bankruptcy・・・・
Fund No.1: 1.05m USD
Fund No.2: 1.05m USD
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
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In the passive investment era, investors try to build some index compatible portfolio.
Lower interest era and investor’s headaches(2)
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.
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Lower interest era and investor’s headaches(3)
There are “Sunny Days” and “Rainy Days” in Business Climate
There is no company free from unexpected events/change in business climate
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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
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Why Corporate Value?
What is your familiar Japanese Company?
What is your Impression on Japanese Company?
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Some bitter experience(1)
Disappointingly,
Corporate scandals revealed one after
another in Japan
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Why these scandals were not revealed for a long time?
Is there any way to detect such a “deception” ?
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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.
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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
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Relation between ESG and Business Value Creation
Business Value = Evaluated in Financial Information
Business Environment
G E S
Business Activities = Value Making Process
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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
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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
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One Possible Solution
AI/Digital data analytics
But computer is not Almighty
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Financial Reports
Standardized /Structured
Comparable in Element base
Easy to be analyzed by Computer
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Not-Standardized/Un-
Structured
Difficult to compare in Element base
Difficult to be read by computer
Non-Financial Reports
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One more difficulty
Data format
In most cases, Non-Financial reports are published in HTML or PDF
But computer can’t understand these
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is here!
eXtensible Business Reporting Language
Any solution?
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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
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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
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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
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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.
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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
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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
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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
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
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
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
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
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Example of Text Analytics(2)
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
Similarity:86%
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Example of Text Analytics(3)
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 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
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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.
© 2019 NTT DATA Corporation 54
Some use cases
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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)
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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.
Case in Japan----Environment Report in XBRL (2)
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Case in Japan----Environment Report in XBRL (3)
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Case in Japan----Environment Report in XBRL (4)
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Case in Japan----Environment Report in XBRL (5) A scene on group matchmaking
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Case in Japan----Environment Report in XBRL (6) Registered investor’s profile
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Case in Japan----Environment Report in XBRL (7)
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Case in Japan----Environment Report in XBRL (8)
DEMO
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Towards future
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Individual Persons
SDGs
Actions
Investors
Goals
Pension Fund
Mechanism in Non-Business Sector
How to motivate people/society to start actions for better future
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Issues to be overcome
How to digitize/visualize unstructured information
There is a very tough issue to be solved
That is ・・・
© 2018 NTT DATA Corporation 66
http://oi.nttdata.com/en/contest/
One trial to change the world
© 2018 NTT DATA Corporation 67
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
© 2018 NTT DATA Corporation 68
Gland Winner in 2017
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© 2018 NTT DATA Corporation 70
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?
© 2018 NTT DATA Corporation 71
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
© 2018 NTT DATA Corporation 72
Model of Social Coin(2)
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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
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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.
© 2018 NTT DATA Corporation 75
Thank you for your attention!
© 2019 NTT DATA Corporation