Spotlight on ESG Data

Demand from investors for environment, social, and governance (ESG) data and products has never been stronger. ESG data providers play an important role in the investment process by gathering and assessing information about companies’ ESG practices and then scoring those companies accordingly.

ESG investing can be, by nature, a subjective field. So, whatever their reasons for investing in ESG, it’s important for investors to understand the ratings, metrics and methodology that measures company impact. Getting quality data and in-depth company analysis can have a significant influence on investment decisions.

Despite ESG investing being one of the biggest growth areas in the funds industry, there is a data problem at the centre of it. Because ESG issues are so varied, indices for benchmarking company track records and methodologies used to measure them, differ across providers. This means a company rating can diverge from one provider to another. Other challenges remain around correlation and consistency but as company disclosures, reporting and transparency improve, data providers will continue to provide a key role as the ESG landscape progresses.

There are a few global players like MSCI, ISS, Bloomberg, FTSE Russell and Refinitiv (London Stock Exchange Group takeover approved 13 Jan), but also a number of ESG specialists on the market. Some like Truvalue Labs and RepRisk are even using AI and Machine Learning solutions to inform ESG datapoints and identify themes for indexes and risks for companies.

We take a look at some of the ESG data specialists who are joining the dots between corporates and investors.

Founded in 2016, Urgentem (formerly Engaged Tracking) is a leading independent provider of transparent carbon emission data and climate risk analytics. They see themselves as climate transition catalysts and use their rankings/partner collaborations to boost awareness and advocate for better disclosure of emissions data. Their approach combines best practices and insights from climate finance and data science experts.

They have also developed a climate risk platform called Element6™ to offer a universal view of climate risk at a company, sector and portfolio, including scenario analysis, sectoral emissions attribution and forward-looking analysis.
This innovative data provider tracks and assesses over 30,000 companies’ involvement in ESG topics utilising AI, Machine Learning and Neuro-linguistic programming techniques to rate companies’ involvement in over 50 ESG topics.

Sensefolio don’t rely on just one source and aggregate more than 100,000 sources of information from news, reports, social media posts and company reviews. Talk about diligence! This is then constructed into over 200 million data points and converted into more than 10,000 different metrics which are mapped to just over 50 ESG sub-categories. Lastly, the scores are normalised and given a final weighting.

Sensefolio has developed ways to categorize the different themes developed by the leading reporting frameworks like Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the UN Sustainable Development Goals (SDGs). They have also developed the Sensefolio ESG Country Framework (SECF) allowing people to monitor and track the impact countries can have.

This award winning ESG and impact data provider, produces issuer level data and portfolio footprint on 14 sustainability factors across ESG and Social Development Goals (SDG). They pride themselves on not inviting in-house views or analyst biases into the factors to maintain maximum objectivity. While the data largely comes from companies themselves, they collect, process and estimate data in-house and currently maintain 17,000+ issuers in the existing database, and guarantee additional coverage of any listed issuer ad-hoc on demand.

In early 2020, Impact-Cubed launched a ‘greenwash checker’ tool to help investors anticipate and avoid funds or portfolios that have misleading green credentials.

Early Metrics
The first international rating agency for start-ups and innovative SMEs has developed its own methodology and criteria based on the UN’s 17 SDGs and existing regulations to measure a start-up/ SME’s ESG impact. As they have strong expertise in the start-up ecosystem, Early Metrics can structure and extract meaningful data from entrepreneurs.

Founded in 2014, it has rated over 3,500 European and international start-ups to provide an in-depth understanding of their innovation and growth potential.

Amsterdam-based Sustainalytics is a leading global provider of ESG research, ratings, and data and popular with investors. Now for some facts and figures! Sustainalytics’ ESG Data covers over 12,000 companies, includes more than 220 ESG indicators, 450 fields and encompasses most major global indices.

Sustainalytics launched a new risk ratings system which was seen as a ‘game-changer’ in the industry. The system allowed investors to better assess the materiality of ESG factors – measuring
a company’s exposure to industry-specific material risks and how well the company manages those risks. The ratings framework is supported by 20 material ESG issues that are underpinned by more than 300 indicators and 1,300 datapoints.

In the summer of 2020, they made ESG risk ratings on more than 4,000 public companies available on their website for all financial market stakeholders to access, increasing visibility. They are noted for their ability to evolve and address investor and company needs, offering new services, insights and specific products such as its carbon risk products.

Are you in the ESG industry and looking to further enhance trust amongst your key stakeholders via the media ? Get in touch with our award-winning team of experts today to discuss how we could help.

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