17 Feb, 2022

Investors seek raw ESG data to power up


This article was originally published by International Financing Review (Investors seek raw ESG data to power up by Tessa Walsh)
ESG is moving into a new phase focused on delivering on net zero commitments that will reshape the provision and collection of ESG data, according to Daniel Klier, president of ESG data investment research and asset manager Arabesque.

After last year’s UN COP26 meeting, investors are moving away from single indicators, such as ESG scores or ratings, and are looking for forward-looking data and flexible raw data feeds to power their own work on investment decisions, risk management and modelling and to meet growing regulatory requirements.

“If you want to move ESG out of the ethical corner into the core of the investment process, you need to put your data at the core of the investment process,” Klier said.

“Investors want to use ESG data to address the use case that they have, rather than be told their ESG score by a data provider.”

Klier was formerly HSBC’s global head of sustainable finance and joined Arabesque last June. Arabesque provides technology for sustainable finance and offers ESG investment strategies, data and insights for financial decision-making using artificial intelligence technology.

The firm’s asset management arm uses mathematical models to target ESG investments and Klier is also CEO of its S-Ray arm, which provides data and ESG metrics to assess the sustainability performance of companies.

Private markets push

Reported data on large, listed companies are backward looking and often inaccurate, and the push of ESG into private markets where data are harder to acquire is requiring a new approach to fill large data gaps.

Arabesque launched ESG Book in December, which is a central digital hub for corporate sustainable information that makes raw data available for free and charges for any analytics created. 

Investors and banks can also invite companies to disclose straight onto ESG Book’s platform to gather necessary data. It has been created with a group of founding partners that includes the IFC, Deutsche Bank and HSBC and lenders can incorporate data disclosure into credit agreements.

“The interesting discussion of the moment is how do you get into private markets and how do you use alternative data sources to turn this into insight,” Klier said.

“People want raw data. There’s so much wealth in unstructured data but people need help to create investment sights that help capital allocation.”

Arabesque has recently announced a partnership that integrates its ESG data products with cloud technology company Snowflake, which will allow clients to import ESG data products into their technology.

This will give access to Arabesque’s full data set in real time, which includes sustainability performance metrics and green revenue data, alignment with Taskforce on Climate-Related Financial Disclosures and Sustainable Finance Disclosure Regulation as well as temperature scores and UN Global Compact scores.

These new data sets are expected to be used to develop new ESG funds that target more specific ESG topics with investment propositions such as climate funds and energy transition funds that will help managers to counter accusations of greenwashing.