Substantive Research completes survey of evolving ESG data marketplace
Substantive Research, a research discovery and research spend analytics provider for the buy-side, has published the findings of its independent survey of the evolving Environmental Social and Governance (ESG) data provider marketplace.
Its final report is entitled: “How to Combat Greenwashing? Find the Right Data Partner”.
Spending on ESG data is on the rise at an annual growth rate of 20 per cent and forecasted to approach USD1 billion by 2021, and global ESG assets are expected to reach USD53 trillion by 2025, on track to represent more than a third of projected global Assets Under Management (AUM). Investors are therefore now placing greater emphasis on company disclosures, ESG integration and ratings agencies.
With concerns over the ‘greenwashing’ of sustainability performance amongst organisations, identifying those ESG data providers who present information with transparent methodologies has never been more important.
Substantive Research has developed an industry-first, ESG Data Provider Dashboard that provides a searchable database of more than 140 ESG data providers, mapping out the ESG data market and showing the choices available. This gives customers the opportunity to discover and compare suppliers of ESG data all in one convenient place, as well as providing confidence that they are gaining accurate views of actual ESG performance.
Over 300 data vendors were analysed through multiple sources, including direct 1-on-1 interviews with over 200 potential data vendors to construct a database of high quality providers, including those new to the market, as well as and the longer-standing firms.
According to the report, whilst many consumers of ESG data select well-established institutions as their supplier, Substantive Research has discovered an extremely rich and diverse ecosystem of providers outside of the ‘household names’.
Start-ups (1-5 years in existence) already make up over a third of market supply, some 39 per cent of Substantive Research’s list, while Mid-level (started 6-10 years ago) and Established firms (started 10-plus years ago) constitute 24 per cent and 37 per cent, respectively.
Some 53 per cent of the providers are generalists, in the sense that they provide all three Environmental, Social and Governance data to clients while only 33 per cent specialise in ‘E’, ‘S’, or ‘G’ only. As the ESG process within asset managers evolves, shopping for data is likely to increasingly target specialists, as buy-side firms look to create their own ‘special sauce’.
Of these specialists, just 5 per cent are targeted towards Social, 70 per cent specialise in Environmental and 25 per cent in Governance.
70 per cent of the providers have developed their own ESG frameworks in combination with one or more of 20 other global sustainable reporting standards.
Mike Carrodus, CEO of Substantive Research, says: “The ESG data market is evolving at a dizzying rate and it can be tough for the buy-side to stay on top of what’s out there. We’ve found that there is already a wide array of providers, with many offering different specialisms and expertise, so there are definite advantages out there for those who look further than well-known names.
“Covid has pushed Social issues to the forefront with topics such as equality, human rights, labour rights, and product safety and quality rapidly emerging. So although the ‘S’ in ‘ESG’ can be difficult to quantify, we expect the number of providers specialising in ‘S’ to grow from the current low proportion of 5 per cent.”