The venture capital arm of ERP company Workday has invested in startup pulsESG -- as major software companies continue to buy or build their way into carbon accounting and ESG reporting software.
Workday follows Accenture in backing pulsESG – which launched in October 2021 with $8.5 million in seed funding. (Accenture Ventures’ Project Spotlight, an early investment program that “connects emerging technology software startups with the Global 2000 to fill strategic innovation gaps” also invested in July 2022.)
The planned integration of pulsESG with Workday Financial Management and Workday Human Capital Management will allow joint customers to “translate structured and unstructured sources of data into financial information for disclosure management and external reporting” the two said in a November 14 release.
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“The aim of the integration is to provide organizations with the ability to assign ESG goals and track their performance against those goals, leveraging data readily available in their Workday applications” they added.
They did not disclosure the investment sum.
pulsESG is led by former Oracle EVP and TIBCO veteran Inderjeet Singh (co-founder and CTO) and Murat Sönmez (co-founder of TIBCO Software in 1997, who also sits on the managing board of the WEF.
Workday’s pulsESG investment comes as regulatory pressure mounts
The investment comes as startups proliferate in the space, amid renewed pressure by regulators on companies to provide more detailed emissions data, and as institutional investors ramp up ESG integration demands.
Investors have been keen to put their money into the sector: Carbon accounting startup Persefoni in November 2021 raised a record $101 million in a Series B (the largest funding round for a climate tech software company.
The investment comes as a recent climate risk assessment from the Office of Management and Budget found that the US government will need to spend $25 billion to $128 billion annually to mitigate climate-related financial risks – while analysis by the Network for Greening the Financial System estimated that, under current policy pathways, climate change could reduce US GDP by 3% to 10% by the end of the century.
That has driven strong investor demand for climate-related disclosures. Investors with $130 trillion in assets under management have requested that companies disclose their climate risks.
And 5,000-plus signatories to the UN Principles for Responsible Investment—a group with a core goal of helping investors protect their portfolios from climate-related risks—manage more than $121 trillion as of June 2022.
Software that can help companies deliver accurate reporting is going to be increasingly critical.
UK regulators are taking ESG disclosures seriously
In the UK alone, for example, the biggest UK-registered companies and financial institutions are obliged to report a range of climate-related disclosures under rules that becane mandatory in April 2022.
Early analysis of these disclosures by the Financial Conduct Authority (FCA) this summer revealed that it had “found some instances where… the disclosures themselves appeared to be very limited in content.
It added: “We are considering these in more detail and may take action…”
The FCA added: “Looking ahead to disclosures for the 2022 reporting period, one example of where these may be particularly useful is in respect of the net zero commitments that companies are making.
“Where you are making net zero commitments, we encourage you to consider the TCFD’s guidance on Metrics, Targets and Transition Plans, and to ensure that your disclosures are not misleading.”
“We remind you of the direction of travel in corporate reporting on climate change and other sustainability matters, as set out in the Government’s Roadmap on Sustainable Investing. We intend, subject to our usual public consultation processes and cost benefit analysis, to adapt our regime to reference forthcoming International Sustainability Standards Board (ISSB) standards – so, we strongly encourage you to continue to deepen your familiarity with the TCFD’s recommendations and further improve your internal processes to ensure that you are ready to disclose effectively against the ISSB’s standards once finalised and adopted…”
