ESG launches Nigeria’s first AI rating tool

Environmental, Social and Governance (ESG), a data analytics company, has announced the launch of the country’s first Artificial Intelligence (AI) and machine learning rating tool, developed by Africans for Africa.

According to the company, ESG GPS is based on global standards and bespoke to the country’s laws, regulations, and best practices.

Commenting on the launch, Acting Chief Executive Officer of Risk Insights, Anashrin Pillay said ESG GPS uses machine learning and artificial intelligence to process unstructured data with structured financial information to provide a rating to a listed corporate.

He explained that Risk Insights ESG GPS tool considers voluntary and mandatory disclosure, negative news feeds, change in share price, market capitalisation and PE ratios over a period to rate companies performance.

According to him, the rating model shows a strong correlation between company disclosure and sustainability.

“As the world moves into a new era of climate change reporting, taking all stakeholders into account, Africa has its tool that considers the African dynamics of the country’s laws and its people.

“We believe that this rating tool will assist the Nigerian economy drive towards sustainability as companies continue to improve their disclosure.”

He said the tool would enable greater transparency, accountability, and sustainability, enabling corporates in Nigeria to attract impact investments and lower the cost of funds.

He argued that conscious capital considering society and the environment, in addition to governance is critical for this new era of governance.

Speaking on the rating, Pillay said the ratings are based on TF-IDF* scores that are completely independent and can be used by investors, corporates and other stakeholders to identify key ESG risks and opportunities for listed NGX counters.

He pointed out that the Risk Insights ESG database and platform is enriched with data for all listed companies on the NGX, rated by sector for a particular financial year.

Explaining further, Pillay said ESG GPS uses an algorithm to gather and rate institutions as companies’ integrated reports are published together with other voluntary and mandatory reports,

He added that the retrospective rating provides a forward view of the companies’ sustainability while ESG rating and disclosure reporting are embedded into strategy and not a point in time statistic.

The Chief Executive Officer of Nigerian Exchange, Temi Popoola said: “Environmental, Social and Governance (ESG) factors have become a critical aspect of the investment decision-making process.

He pointed out that the prevailing challenges of inconsistency, incomparability and lack of alignment in standards of ESG reporting frameworks present the most significant concern for investors in their quest to access decision-useful ESG investment data.

“For us at NGX, we are committed to fostering the growth of ESG reporting across our ecosystem. By unveiling the NGX Sustainability Disclosure Guidelines in 2019, we provided a consistent approach for investors to access ESG data from issuers listed on NGX.

“Risk Insights has taken this a step further by building the first ESG machine learning and AI tool for Africans. We welcome the application of this innovative solution in improving Sustainable, Responsible and Impact (SRI) in Africa and look forward to reaping the benefits of improved allocation of capital to support Africa’s sustainable development and transition to a low carbon economy.”

Pillay added that: “Sustainability, as a business imperative, continues to increase in importance. Targets, such as the 2030 Agenda for Sustainable Development and Net Zero by 2050, highlight the growing demand for attention in the transition to greater sustainable development.

“Our ambition is to support countries across the African continent, ensuring the African continents ability to compete on the global stage.”