In today’s investment landscape, ESG stewardship is a key priority. In theory, evaluating ESG performance and engaging companies to improve should be straightforward, but most investment stewardship teams are facing major obstacles, many of which lead back to a single problem: getting the right data. The right data is a critical guide for stewardship teams navigating the complexities of evaluating ESG performance and engaging companies on their sustainability commitments. But to date, most stewardship teams have not been able to get the qualitative and quantitative data they need at the speed and scale they need to make an impact.
Here, we explore the current data gaps in the world of ESG stewardship.
Why ESG data matters for stewardship teams
Without easy access to the right data, stewardship teams are limited in their ability to identify the companies that require the most engagement, engage effectively and efficiently with these companies, and track progress year on year. What these teams need is highly detailed information that offers deeper insight than a single, broad ESG score. They need a mix of quantitative and qualitative data documenting a company’s track record, current initiatives, future targets, and credible plans to achieve these targets, to help them get a deep understanding of a company’s sustainability journey. And they also need standardized, comparable data that allows them to benchmark companies against their peers and identify ESG-related risk hotspots within their portfolios in order to focus their engagement efforts and give confidence to proxy voting decisions.
Most stewardship teams don’t have easy access to this kind of data yet, mostly because there are still some major gaps in the data offered by popular third-party providers. Until these gaps are closed, these teams are spending their time manually collecting and validating data rather than making a long-term impact.
What’s missing in third-party ESG data
Many investment firms are used to relying on third-party data to evaluate investment decisions and track portfolio company performance. Naturally, as ESG becomes a priority, investment companies seek out external ESG data in the same manner. But it doesn’t take long for these companies to realize that ESG is a whole new world, requiring far more and a different kind of data that most third-party providers are not yet able to provide.
What’s missing in third-party ESG data today? Primarily, nuance. Third-party providers often offer a single broad ESG ‘score’ that fails to capture the various nuances within or provide justification for why a company is scored in a particular way. A single score encompassing economic, social, and governance performance is far too vague to drive meaningful engagement for improvement. Meanwhile, many companies have found their own scores inadequately reflect their ESG initiatives, leading many to conclude that the data from these providers is significantly out of date — not a good thing for stewardship and investment teams. It’s impossible to confirm, though, because these providers do not reference the backup documentation from which their score is created. A lack of transparency means stewardship teams can’t validate the data without going hunting through documents on their own — another problem we’ll discuss later. Although some elements of ESG data, such as greenhouse gas emissions, appear to be improving in accuracy, investors, for the most part, are unimpressed with current ESG data.
Broad ESG scores also fail to offer the kinds of critical insights that can only be gleaned through high-quality qualitative data. Aspects such as the nuances of corporate governance approaches, sustainability commitments, and complex disclosure compliance are necessary elements of a company’s ESG performance, but currently, investment firms need to hunt down this information independently, which leads to the problem of manually ‘grinding it out’ in the hunt for data.
The manual grind: the workaround for bad ESG data is extremely time-consuming
Investment firms that take ESG stewardship seriously and recognize the limitations of third-party data are moving beyond third-party data and into the realm of DIY investigations. It’s a step in the right direction, but it’s also a step in the direction of tying up all of your team’s time in research and analysis. Stewardship teams, themselves often drastically under-resourced, are painstakingly combing through their issuers’ (or private companies’) sustainability and financial documents to piece together a more informed story.
The problem is that this approach gives teams the data they need — at a pace they can’t afford. Manual ESG analysis sets teams way back, draining their time and resources while the CTRL+F for key information, engaged in ‘reactive analysis’ rather than the all-important work of proactive engagement. If a stewardship team’s role is to move issuers forward on ESG concerns, they cannot spend the bulk of their time in analysis mode.
We’ve heard from many teams that the burden of manual research turns what should be productive company engagement meetings into meetings that consist mostly of following up on missing data and asking clarifying questions. This makes the engagement process disorganized and far less efficient, significantly delaying meaningful engagement and thus, actual ESG progress.
Introducing a new kind of ESG intelligence for stewardship teams
A new kind of ESG intelligence is available for stewardship and investment teams — one that solves the current data gaps in the market and helps teams prioritize engagement over analysis by doing the manual work for them.
Benchmarking
Manifest Climate is the leading climate intelligence tool for stewardship teams. Our ESG data platform provides comprehensive ESG insights on demand, allowing investment firms to benchmark issuers against their sector, industry, and custom-selected peers. This makes it easy for companies to identify ESG leaders and laggards, offering a clear indication of what “good” looks like.
Standard-specific data
Rather than providing broad ESG ‘scores’, Manifest Climate offers detailed breakdowns of how well companies measure up to relevant global standards such as the ISSB, SEC, TCFD, CSRD, and more.
Highest quality data
The data presented within Manifest Climate is raw, allowing you to to reach your own conclusions on ESG performance, rather than relying on a single ESG score. All data is fully traceable, with all surfaced information referencing source documents (such as a particular page in a sustainability report) so teams can dig deeper in any given area.
Automated and intelligent
Using AI to scrape the web for thousands of sustainability and financial disclosures, Manifest Climate saves your team countless hours that would typically be spent manually searching through documents for the data they need. Our centralized database keeps teams organized, allowing for more efficient and effective engagements with issuers.
Ultimately, Manifest Climate allows stewardship teams to get a highly nuanced picture of a company’s ESG journey very quickly, allowing them to move past the analysis stage and spend the bulk of their time in engagement mode.
Conclusion: New data for a new era of ESG
Spreadsheet-lovers may be happy to know that the corporate transition to net zero (or at least, more sustainable practices) hinges on the right people having the right data at the right times. In today’s data-driven world, companies that leverage the right data to figure out what’s not working — and, crucially, how to fix it — will make the biggest impact in the green transition.
