What Constitutes ESG Data?

Environmental, Social and Governance (ESG) data is an umbrella term used to reference data that considers these factors in assessing a country, corporation, consumer or activity. In the current environment, ESG data is in high demand for two key reasons. First, regulatory frameworks are being actively updated and corporations will need to be compliant with these changes. Second, there is a new understanding that compliance with ESG standards and unique interpretations and applications of ESG insights may go hand-in-hand with corporate success.

While the term is used broadly, it is useful to take a step back and better understand the factors under consideration in each category constituting ESG standards.

• Environmental: Greenhouse gas emissions, nuclear energy, climate change risks, air, water and waste pollution, renewable energy, deforestation, clean technology
  
  
• Social: Employee relations, diversity and inclusion, working conditions, including health and safety and compliance with international labour standards, supply chain standards
  
  
• Governance: Business strategies, code of ethics, internal policies and procedures that truthfully reflect the organization’s practices, executive compensation, board accountability and diversity, transparency and disclosure, anti-corruption measures
  

ESG data is collected and collated from multiple public and private, structured and unstructured assets including company annual reports, CSR assessments, company websites, direct disclosures, regulatory filings, news, climate models and scientific literature and can be thought of in four broad categories of Sentiment, Risk, Corporate & Company and Fund. Each of these categories is briefly described below.

Sentiment

• Establishes the disposition of content towards its subject matter 
  
  
• Provides broad market signals allowing for short or long bias when investing or trading
  
  
• Allows organizations to understand how stakeholders feel about their achievements in the ESG sphere
  
  
• Can be company-specific or a broader industry view of how a company is performing

Risk

• Allows the assessment and measurement of a company’s exposure to ESG risks and how well they are managing those risks
  
  
• Risks can include reputational risk, greenwashing risk, carbon risk, climate risk, compliance risk, human capital risk, health and safety risk etc.

Corporate & Company

• Allows the evaluation of a company’s sustainability performance (will include risks, opportunities and impact along the corporate value chain)
  
  
• Uncover indicators of a company’s future financial performance
  
  
• Understand company metrics such as employee diversity

Fund

• Aims to measure the sustainability and resilience of a fund across ESG factors
  
  
• Enables institutional and individual investors to identify funds that align to their ESG objectives  
  
  
• Ability to track real-time changes needed for decision-making and risk management

Data attributes across these categories can be raw or derived in the form of a score or a rating. Whilst scores and ratings aim to add agnostic insight and expertise, they can lack transparency in their derivation and consist of substantially different methodologies depending on the source and the underlying objective eg. assessing financial risk, climate change risk, social risk etc. 

Demyst can help organizations tap into the ESG data universe through an external data platform that provides access to 1,000’s of data partners worldwide.