Non-finance data sets increasingly sit at the heart of investment with over 70 per cent of decisions impacted by ESG Factors, says Bright Data research
Bright Data (formerly Luminati Networks), an online data collection platform, has released new research findings that underscore the importance of ESG considerations in investing, and demonstrate the importance organiations place on environmental and social impact when doing business.
The research, carried out by research provider Vanson Bourne, highlighted US survey respondents from within the finance, banking and insurance sectors who said that just over three-quarters (76 per cent) of their organisation’s investment decisions are impacted by ESG factors, whereas for UK respondents it’s 67 per cent.
Traditionally, the finance sector has relied heavily on pure financial data sets, but research has shown the increase in awareness around ESG considerations. This is powered by ESG data sets, a form of alternative/external data, and includes measurable metrics from areas such as energy use, emissions, harassment and discrimination lawsuits, board diversity, social involvement, or involvement in worthy causes.
The findings ranked the most pressing ESG considerations and found environmental practices (69 per cent), organisational diversity (64 per cent), and corporate governance (64 per cent) as the most important considerations for 100 CDOs (Chief Data Scientists), CTOs, Heads of Data, CIOs and those who report to them. In addition to impacting investment decisions, ESG performance was also reviewed for business partnerships, with 95 per cent of survey respondents in the US and UK saying that their respective organisations take the ESG performance of its suppliers/vendors into account.
Data is undoubtedly the lifeblood of business, and publicly available web-based data is being collected to generate insights surrounding ESG performance. The use of data is a key takeaway from the research as 100 per cent of interviewed respondents from data departments stated that their organisations incorporate ESG data into all or some business strategy decisions.
According to the survey, 88 per cent of survey respondents stated that they are part of organisations where measuring and reporting on ESG performance is either a key metric or of moderate importance to their business.
Some 66 per cent of survey respondents, meanwhile, who are at the most senior level of their organisations stated that ESG is a key metric in their organisations, compared to just 40 per cent of departmental and intermediate management.
A total of 80 per cent of survey respondents who are at the most senior level of their organisations stated that ESG is incorporated into all business strategy decisions, compared to 30 per cent of departmental and intermediate management.
Despite likely having fewer resources, 73 per cent of survey respondents from organisations with 250-1000 employees stated they would definitely change business practices that were found harmful to society, even if it did not make commercial sense to do so. This compares to only 60 per cent of respondents from organisations with more than 1000 employees who could say the same thing.
ESG is a key metric for 68 per cent of organisations with 250-1000 employees, but it’s only a key metric for 52 per cent of organisations with more than 1000 employees.
"Not only are companies basing their own investment decisions on ESG factors, but investment, private equity and venture capital firms are increasingly factoring in ESG performance metrics from the companies they choose to invest in," says Douglas Laney, Innovation Fellow, West Monroe. “Moreover, many companies are scrambling to determine how to source internal and external data to generate trustworthy metrics and reporting required for the issuance of sustainability bonds," Laney added.
"This kind of information is mission-critical for those companies looking to make prudent long-term investment decisions,” says Or Lenchner, CEO of Bright Data. “In today’s market, investors require the full picture when making crucial investment decisions and gaining insight from ESG-related data is now a key indicator. This has been made possible by the explosion of alternative data – publicly available information released by or about organisations, online data included. Investors are now using these data sets to form a clear picture of the market and create their strategy moving forwards. The gap between those that use ESG alternative data to inform decision-making and those who don’t is often vast, and this gap will continue to grow. This is especially true within the investment sector, and any organisations not using it run the risk of being left behind or making the wrong decision,” says Lenchner.