The ESG data market is expected to grow in response to investors' increasing demand for transparency and accountability. The integration of sustainability will drive the need for ESG data into investment decisions through impact investing, which has been gaining traction among institutional and retail investors over the past decade.
Despite the uncertainty of diverging methodologies and technologies, ESG data will continue to be sought after by asset managers who have vowed to integrate a sustainable approach into their investment philosophies. The demand for ESG data as a critical component for making investment decisions will not diminish. And with the complexity of ESG issues now abundantly clear, data quality and transparency are becoming more crucial.
The Challenges of ESG Data are Daunting but not Insurmountable
As more companies adopt ESG as a business strategy, the quantity and quality of ESG data will continue to improve. In addition, there is growing interest in developing standards for reporting on key ESG issues such as carbon emissions and water use.
We expect the global supply of ESG data to increase due to the proliferation of ESG initiatives. In addition, many companies are already collecting ESG data internally. They will continue to do so to meet the growing investor demand for information about their sustainability performance.
Companies not currently collecting ESG data may decide to do so in the future, and this will likely occur due to regulatory requirements or new legislation. For example, many companies are considering how they can meet the reporting requirements of the EU’s Accounting Directive (IASB) and Transparency Directive (CRD IV). They may also take advantage of existing opportunities to collect ESG data through their supply chain management processes.
The Momentum for ESG Data Collection is Building
We’re seeing a growing number of companies collecting ESG data and using it to inform their strategy and operations. As a result, we expect that the amount of available ESG data will continue to increase over time. This has several implications.
First, it’s likely to accelerate the development of ESG data analytics tools and services that can help companies integrate ESG metrics into their decision-making processes.
Second, the increasing availability of ESG data could lead some investors to view these trends as evidence that there is no longer a need to engage proxy advisory firms to continue evaluating company policies and practices on environmental, social, and governance issues.
Are Data Vendors Giving Investors the Data They REALLY Need?
Many investors feel that ESG data available from the vendors is opaque, and the ESG rating is hard to understand.
As an ESG Data-As-A-Service (DaaS) provider, we have been asking ourselves, "What can we do to improve our offerings to serve the investment community better?" We have worked hard to understand what data might be available and how to obtain it effectively. The impact investing industry will continue to grow, and data sourcing and structuring will play an essential role in this growth.
For example, the market has demanded detailed and verifiable GHG Emissions data. We have recently released the GHG data set, including Scope 1, 2, 3, and the 15 categories of Scope 3 data for Russell 3000 companies.
Whether you're a hedge fund trying to hedge the risk of climate change or an asset management firm trying to diversify into "green" investments, you're going to need ESG data, and you'll need it fast. Our team at idaciti has pioneered market-tested technology to structure sustainability data and make it actionable. We have worked hard to innovate and bring more valuable data to the market.
Let us help you navigate the wild frontier of ESG data.