EthiFinance and SESAMm join forces to detect ESG controversies on SMEs
December 16, 2021
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5 mins read
PARIS, December 16, 2021
SESAMm, an alternative data specialist at the forefront of AI-based text analytics, and EthiFinance, a non-financial analysis and consulting agency with expertise in sustainable development, are now working together to launch a new unique service: Identifying and scoring ESG controversies on European Small & Midsize Enterprises (SMEs).
When dealing with SMEs, a common issue with traditional data providers and rating agencies is the lack of coverage. Information gaps and opacity about a company can negatively affect asset managers in their investment decisions.
EthiFinance possesses strong expertise in rating SMEs – both listed and private – for the purpose of portfolio due diligence and monitoring. SESAMm’s TextReveal® tool leverages Natural Language Processing (NLP) to analyze more than 16 billion online articles and messages to track ESG topics.
“We have been working with SESAMm for months and have now reached a stage where we can deliver quality and depth of results needed to create reliable and relevant ESG alerts.”, shares Xavier Leroy, Head of Investor Services from EthiFinance “Our teams of ESG analysts have enhanced and refined these alerts for controversies into our methodology, thus ensuring value to our clients”.
Controversy detections are notoriously difficult to assess and evaluate properly, be it the language barrier, lack of data, or difficulty for machines to work with ambiguity. The democratization of artificial intelligence and data science, the exponential growth of data, and wider access to more computing power have provided a fertile ground for new solutions to address this issue.
“Natural Language Processing is a game-changer, especially when working on ESG. Combined with alternative data, it helps us crunch billions of articles in dozens of languages and detect controversies very quickly” explains Sylvain Forté, CEO of SESAMm. “By fine-tuning TextReveal® with EthiFinance’s expertise in ESG, we are able to reach excellent results with 100% accuracy on the detection of critical controversies.”
SESAMm’s data and tools are leveraged globally by asset managers like The Carlyle Group, to conduct ESG studies for the purpose of due diligence, company analysis, and risk management. The partnership with EthiFinance breaks new ground thanks to its unique expertise in sustainability, ESG know-how, and very specific focus on European midsized companies.
SESAMm and EthiFinance have also developed a specific virality indicator to help assess how ESG controversies are spreading on the web. “This technological edge relies on an enormous amount of data which we can access through SESAMm’s platform,” shares Leroy.
A worldwide scandal, significantly impacting a company’s market price and its ESG scoring, can start from just one article or post, sometimes in a very niche community. SESAMm’s data lake, with its billions of articles and documents, serves as a real-time curated proxy of the internet enabling the timely detection of such scandals and the subsequent insights.
“This level of speed and depth of information not only represents a headstart when it comes to the competition but also a safety-net for asset managers, looking to monitor and manage their portfolio” confides Forté. “This innovative approach can be applied to other regions, Europe is only a starting point.”
The two companies are now working together to expand this innovative approach to listed companies across Europe.
About EthiFinance
Founded in 2004, EthiFinance is a non-financial analysis and consulting agency that supports its clients in managing risks and opportunities related to sustainable development.
EthiFinance develops services tailor-made to meet the specific needs of its clients, including investors, banks, companies and not-for-profit organizations.
Since 2017, EthiFinance has been working closely with Spread Research, a French financial rating agency (registered with ESMA) and independent credit research provider. The two companies are now part of the Qivalio Group.
Qivalio is an innovative European group providing rating, research, and consulting services in the field of sustainable finance. The Group provides solutions for investors, companies and organizations to address the challenges raised by financing as well as social and environmental transformations.
SESAMm (www.sesamm.com) is an innovative company specializing in alternative data and artificial intelligence for investment. Its team builds analytics and indicators, such as Sentiment Analytics, ESG Indicators, and investment signals by analyzing billions of web articles and messages using natural language processing and machine learning. With its NLP platform TextReveal®, SESAMm addresses the entire value chain of alpha research. With 6 offices including Paris, New York, London, and Tokyo, SESAMm works with major hedge funds, banks, private equity firms, corporate and asset management clients around the world for fundamental or quantitative investment use cases, market analysis and competitive insights.
The European Union stands at the forefront of global efforts to promote environmental, social, and governance (ESG) accountability. As the world becomes increasingly ESG-aware, the EU has developed a comprehensive regulatory framework designed to ensure transparency and accountability across all sectors.
These regulations represent the EU's commitment to sustainable development and responsible business practices. However, the regulatory landscape is evolving, with the February 2025 EU Omnibus Proposal introducing potential modifications aimed at reducing the regulatory burden on businesses. However, these proposals come at the risk of substantially undercutting the impact of the regulations.
This article recaps the current ESG regulatory framework in the EU, explores the changes proposed by the Omnibus, analyzes the potential impacts of these modifications, and discusses how financial institutions can navigate this evolving landscape while maintaining compliance.
The ESG Regulatory Landscape in the EU
The EU is advancing sustainability through a framework of regulations that enhance corporate accountability and reporting on ESG impacts. These measures aim to promote genuine sustainable practices and address international trade and emissions challenges. Though comprehensive, these regulations are also, at times, confusing in the way they overlap and impact each other. To get started, let’s examine the EU Taxonomy, SFDR, and CSRD—a triad of interconnected regulations designed to streamline and strengthen sustainable investing practices.
EU Taxonomy
The EU Taxonomy provides a classification system for environmentally sustainable economic activities, offering clear criteria to determine whether an economic activity can be considered "green."
Key Aspects of the EU Taxonomy
Defines criteria for environmentally sustainable economic activities
Requires companies subject to CSRD to report on Taxonomy alignment
The Taxonomy helps channel investment toward genuinely sustainable projects and businesses by creating a common language for sustainable activities.
Status
The EU Taxonomy has been operational since January 2022 with phased implementation. As of March 2025, companies subject to CSRD must disclose their taxonomy alignment percentages.
Sustainable Finance Disclosure Regulation (SFDR)
The SFDR focuses specifically on the financial sector, requiring financial market participants to disclose how they integrate ESG risks into their investment decisions and the sustainability impact of their financial products.
Key Aspects of SFDR
Requires disclosure of ESG risks in investment processes
Classifies financial products based on their sustainability characteristics
Aligns with EU Taxonomy criteria for sustainable investments
Aims to prevent greenwashing in financial products
The SFDR plays a crucial role in bringing transparency to the rapidly growing sustainable investment market.
Status
Fully implemented since March 2021, with enhanced Level 2 requirements since January 2023. All EU financial market participants must classify products under Articles 6, 8, or 9. Current market data shows that 28% of EU funds are compliant with Article 8 and 5% with Article 9, with a significant trend of reclassification from Article 9 to 8 due to stricter interpretations.
The CSRD stands as a cornerstone of the EU's ESG regulatory framework, requiring companies to report comprehensively on their environmental, social, and governance impacts. This directive mandates alignment with the EU Taxonomy, ensuring standardized reporting of sustainability metrics.
Key Aspects of CSRD
Requires detailed reporting on ESG impacts
Aligns with EU Taxonomy criteria for sustainability
Currently applies to companies with 250+ employees
Enhances corporate transparency on sustainability issues
The CSRD represents a significant step forward in standardizing sustainability reporting across the EU, providing investors, consumers, and regulators with comparable information on corporate sustainability performance.
Status
The CSRD, adopted in November 2022, replaces the Non-Financial Reporting Directive (NFRD). The transition to CSRD reporting was originally slated to begin in 2025 and would expand the number of companies subject to reporting requirements to 49,000 (vs 11,700 under NFRD). However, as we’ll see later, the Omnibus may push back the timing of CSRD.
Outside of the EU Taxonomy, SFDR, and CSRD, the Omnibus Proposal highlights two other key ESG regulations: CSDDD and CBAM. These regulations relate to corporate accountability for supply chains and to limiting carbon leakage.
Corporate Sustainability Due Diligence Directive (CSDDD)
The CSDDD focuses on corporate accountability throughout global supply chains, requiring companies to identify, prevent, and mitigate human rights and environmental risks associated with their operations.
Key Aspects of CSDDD
Requires companies to identify and mitigate human rights and environmental risks
Applies to full supply chains, ensuring comprehensive oversight
Applies to EU companies with 1,000+ employees and €450 million+ global turnover and non-EU companies with over €450 million EU turnover
Mandates regular monitoring and reporting on due diligence efforts
Strengthens corporate accountability for sustainability across operations
This directive acknowledges that a company's sustainability impact extends beyond its direct operations, encompassing its entire value chain.
Status
CSDDD was adopted in April 2024. Its phased implementation is slated to start in June 2026 and be completed by June 2028. The timing and scope of CSDDD is subject to change following the Omnibus Proposal.
Carbon Border Adjustment Mechanism (CBAM)
The CBAM is an innovative approach to preventing carbon leakage. It levies a carbon tax on imports to ensure that the EU's ambitious climate policies do not simply shift carbon-intensive production outside its borders.
Key Aspects of CBAM
Imposes a carbon tax on imported goods
Requires importers to report emissions data
Ensures payment for embedded carbon costs in imported products
Aims to prevent carbon leakage to regions with weaker climate policies
This mechanism aims to create a level playing field for EU producers subject to carbon pricing while encouraging global partners to implement similar carbon pricing mechanisms.
Status
The transitional phase for CBAM began in October 2023, with full implementation scheduled for January 2026. It currently covers cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. The certificate requirements will phase in gradually from 30% in 2026 to 100% by 2034. It’s expected to apply to 1.8 million EU importers and generate €5-14 billion in annual revenue when fully implemented.
The February 2025 EU Omnibus Proposal
Purpose and Goals
The EU Omnibus Proposal represents a significant recalibration of the EU's regulatory approach, seeking to balance sustainability ambitions with business competitiveness concerns.
The primary objectives of the Omnibus focus on alleviating regulatory burdens faced by businesses, simplifying compliance requirements, and streamlining reporting obligations. These efforts aim to enhance business competitiveness while addressing regulatory complexity concerns. By minimizing these challenges, the goal is to create a more favorable environment for businesses to thrive. However, this push for simplification could come at the expense of transparency and accountability, especially in sectors where regulation plays a protective role.
Impact Analysis: How the Omnibus Changes ESG Compliance
Below, we’ll take a closer look at each regulation and the changes proposed by the Omnibus Proposal.
EU Taxonomy Modifications and Implications
The Omnibus Proposal suggests a Level 2 modification to the application of the EU Taxonomy, reducing the number of companies required to report taxonomy alignment.
Key Changes:
Taxonomy alignment reporting is limited to companies subject to CSDDD
Voluntary reporting option for companies not required to comply
Possible Implications:
Reduced availability of standardized sustainability data
Increased difficulty in verifying "green" business claims
Higher risk of greenwashing in financial markets
Less reliable information for sustainable investors
These modifications would potentially undermine the Taxonomy's role in creating a common language for sustainable activities.
CSRD Modifications and Implications
The Omnibus Proposal significantly narrows the scope of the CSRD, reducing the number of companies required to report on ESG impacts.
Key Changes:
Threshold increase from 250+ to 1,000+ employees
Optional reporting for SMEs
A two-year delay in reporting obligations for some companies
Possible Implications:
80% reduction in companies required to report
Decreased transparency in corporate sustainability performance
Fewer sustainability data available to investors and regulators
Potential challenges in tracking sustainability progress
These modifications would substantially reduce the regulatory burden on smaller companies but raise concerns about the availability of comprehensive sustainability data.
CSDDD Modifications and Implications
The Omnibus includes significant modifications to CSDDD, with a narrowed scope and reduced monitoring requirements.
Key Changes:
Due diligence is limited to direct suppliers with over 500 employees, not full supply chains
Monitoring frequency reduced from annual to every 5 years
Delayed enforcement for one year for the first batch (Companies with 1.5 billion in turnover and 5000 employees)
Possible Implications:
Weakened corporate accountability for supply chain sustainability
Increased risk of undetected human rights and environmental violations
Reduced monitoring of global supply chain impacts
Extended timeline before full implementation
These changes would significantly reduce companies' compliance burdens but come at the risk of removing the essence of the directive, which is eliminating child labor, forced labor, etc.
SFDR Modifications and Implications
While not directly modified, changes to other regulations, particularly the EU Taxonomy, indirectly affect the SFDR.
Indirect Impacts:
Reduced availability of reliable ESG data
Challenges in differentiating truly sustainable investments
Potential increase in greenwashing risk
These indirect effects could undermine the SFDR's effectiveness in bringing transparency to sustainable investment products.
CBAM Modifications and Implications
The Omnibus Proposal simplifies CBAM compliance, particularly for smaller importers.
Key Changes:
Small importers (under 50 metric tons/year) are exempted
Reduced reporting burden for over 182,000 businesses
Possible Implications:
Simplified compliance for small businesses
Potential loophole risk if companies split shipments to stay under the threshold
Maintained coverage of 99% of emissions despite exemptions
These modifications would maintain the CBAM's effectiveness while reducing the administrative burden on smaller importers.
The Debate: Perspectives on the Omnibus Proposal
Arguments in Favor
Proponents of the Omnibus Proposal emphasize its benefits for business competitiveness and regulatory efficiency. They highlight the reduced administrative burden, especially for small and medium-sized enterprises (SMEs), which often struggle with complex regulations. Additionally, the changes aim to simplify compliance requirements, making it easier for businesses to adhere to regulations. By aligning with global standards, the proposal helps maintain the EU's economic competitiveness while promoting a more efficient allocation of resources across industries. Together, these factors create a more streamlined and supportive environment for businesses to thrive.
As BusinessEurope Director General Markus J. Beyrer stated: "Doing better with fewer and clearer norms is what European companies of all sizes are asking for. By reducing unnecessary reporting and regulatory burdens, the first Omnibus will allow companies to contribute more effectively to the EU's sustainability objectives while also preserving the EU economy's competitiveness."
European Commission President Ursula von der Leyen also expressed support for the proposal, stating: "EU companies will benefit from streamlined rules. This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonization goals."
Criticisms and Concerns
Critics raise significant concerns about the potential undermining of the EU's sustainability ambitions. They argue that the Omnibus Proposal may lead to unintended consequences, including reduced transparency in corporate sustainability performance, weakened supply chain accountability, and regulatory uncertainty during transition periods. Additionally, it could undermine sustainability objectives and increase the risk of greenwashing. As Mariana Ferreira from WWF European Policy Office commented:
"The Commission's sudden urge to destroy laws that are crucial for the achievement of the EU Green Deal is a perilous approach that is forcing Europe into a time of regulatory uncertainty. Under the guise of 'simplification,' the Commission put forward a proposal that will hinder economic and business success."
"The Omnibus proposal erodes EU's corporate accountability commitments and slashes human rights and environmental protections."
While the European Parliament debates the Omnibus Proposal, the fact remains that even if the regulations are delayed or loosened, the need for risk management remains unchanged. Investors require transparency, and companies must manage supplier risk effectively.
Navigating ESG Risks with SESAMm
SESAMm’s cutting-edge AI solutions empower investors, financial institutions, and corporations to navigate the complexities of ESG compliance with confidence. Leveraging an industry-leading data lake and state-of-the-art AI, SESAMm uncovers hidden risks in supply chains and target companies, providing real-time insights that drive proactive decision-making. By transforming regulatory challenges into opportunities for responsible and sustainable growth, SESAMm helps businesses stay ahead of evolving ESG requirements while mitigating risk and enhancing transparency.
SESAMm’s AI Technology Reveals ESG Insights
Discover unparalleled insights into ESG controversies, risks, and opportunities across industries. Learn more about how SESAMm can help you analyze millions of private and public companies using AI-powered text analysis tools.
Paris, September 16th, 2025 – Clarity AI and SESAMm, two pioneers in AI-driven sustainability and risk analysis, today announced a partnership to enhance ESG controversy monitoring in private markets, giving investors unprecedented insights into millions of non-listed companies.
Private markets account for ~$22 trillion in assets under management (AUM), but remain significantly less transparent than listed firms when it comes to sustainability and reputational risks. By combining Clarity AI’s end-to-end sustainability analysis platform with SESAMm’s advanced controversy detection, investors will gain broader, deeper insights into companies that have historically been hard to assess. This lack of visibility creates added challenges for asset managers and financial institutions, particularly as they work to comply with regulations such as SFDR and CSRD.
Through the partnership, Clarity AI’s comprehensive coverage of both public and private companies will be enriched by SESAMm’s real-time controversy data on millions of additional private entities. SESAMm’s multilingual large language models analyze content from over 4 million sources in 100+ languages, surfacing potential red flags such as human rights violations, corruption, and environmental breaches, even in hard-to-assess, non-listed firms.
“SESAMm's technology leads the industry in detecting ESG controversies within private companies. Through our partnership with Clarity AI, we are now bringing this powerful capability directly to investors globally, ensuring they have a full picture of the risk in these markets,” said Sylvain Forté, CEO and co-founder of SESAMm.
“At Clarity AI, our mission is to bring transparency to sustainability, wherever capital flows,” said Daniel González, Global Partnership Director at Clarity AI. “This partnership is a breakthrough for private markets, where opacity has long hindered investors’ ability to monitor ESG risks. By combining SESAMm’s controversy detection with Clarity AI’s end-to-end sustainability platform, we are giving investors the most comprehensive view of both public and private companies. That means stronger due diligence, faster monitoring, and greater confidence in meeting evolving regulatory demands, all in one place.”
This collaboration reinforces Clarity AI's offering for private markets, now including environmental metric estimations for 2.3 million non-listed companies. Together, both firms are taking a significant step toward closing the information gap between public and private markets, equipping asset managers, private equity firms, and financial institutions with actionable insights to better understand reputational and sustainability risks, while supporting due diligence, risk monitoring, and regulatory compliance.
About Clarity AI
Clarity AI is the leading sustainability technology company, delivering data-driven insights to investors, companies, governments, and consumers. Its AI-powered platform offers flexible access to advanced analytics, supporting use cases from portfolio management and research to regulatory reporting, strategic planning, and consumer applications. Trusted by clients managing over $70 trillion in assets, Clarity AI also powers sustainability intelligence through integrations into leading investment platforms such as BlackRock Aladdin, SimCorp or Caceis. The company operates globally, backed by top-tier minority investors including BlackRock, Softbank, and Visa.
About SESAMm
SESAMm is a global leader in controversy data, leveraging advanced large language models and generative AI to uncover ESG, reputational, and supplier risks in seconds. Our AI-powered platform surfaces real-time insights, even in low-disclosure markets, on millions of companies and infrastructure projects, supporting more informed decisions, enhanced due diligence, and regulatory alignment at scale. We work with leading firms, including Carlyle, Warburg, Natixis, RBI, Sustainable Fitch, Oddo, and others. SESAMm has raised $50M from renowned investors and operates across four continents. Learn more at www.sesamm.com.
SESAMm’s AI Technology Reveals ESG Insights
Discover unparalleled insights into ESG controversies, risks, and opportunities across industries. Learn more about how SESAMm can help you analyze millions of private and public companies using AI-powered text analysis tools.
Paris, France and London, UK – July 11, 2024 – SESAMm, a leader in AI-powered text analysis for ESG insights, is pleased to announce that Sustainable Fitch, a leading provider of ESG data, analysis, and research for the sustainability and fixed-income market, will be integrating SESAMm’s data into its ESG Scores and Ratings.
Sustainable Fitch provides ESG data and analytics to both the public and private markets, including asset owners and asset managers. Sustainable Fitch will use SESAMm analytics to monitor companies and industries at a granular level, allowing them to provide further insights to clients to aid their investment and due diligence decision-making.
Sylvain Forté, CEO of SESAMm, commented, “We are excited that a recognized leader in ESG analysis is using our insights for their ESG analysis. Our AI-powered text analysis will provide deeper insights and broader coverage, helping Sustainable Fitch to deliver high-quality ESG data and ratings.”
Gianluca Spinetti, Global Head of ESG Analytics at Sustainable Fitch, added, “Working with SESAMm technology allows us to leverage their advanced solutions to enhance our ESG Scores and Ratings offering. By integrating SESAMm’s extensive data coverage, we can offer our clients more comprehensive ESG insights.”
About SESAMm
SESAMm is a global leader in AI-powered text analytics, specializing in providing insights on ESG controversies and positive-impact events. With its cutting-edge technology, SESAMm helps private equity firms, asset managers, and other financial institutions, as well as ESG consulting firms and rating agencies, monitor and analyze vast amounts of textual data to identify potential risks and opportunities in their investments. For more information, visit SESAMm.
About Sustainable Fitch
Sustainable Fitch provides rigorous, human-powered sustainability research, analysis, and data for the fixed-income market, including ESG Ratings, Second Party Opinions, thought leadership, and more, with a focus on ESG impact. Our objective and substantive suite of products provides transparency, consistency, and granularity that enables confidence in decision-making. Powered by the human insight that has differentiated Fitch for over 100 years, Sustainable Fitch brings experience and heritage to help the financial community make smarter decisions using the best ESG information available.
Discover unparalleled insights into ESG controversies, risks, and opportunities across industries. Learn more about how SESAMm can help you analyze millions of private and public companies using AI-powered text analysis tools.
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