ESG Historical Data; The Increased Bottom Line Explained
ESG X BIG DATA
Sustainability goals and environmental, social, and governance (“ESG”) measures are no longer novel concepts as they become more mainstream topics. Our history shows that unique ESG data can be predictors of company results. Companies, and regulators are increasingly striving to understand why investments with positive ESG attributes are important to integrate. In this Insight, we reveal why ESG and future profitability are linked, and how big data can help investors understand which companies could outperform peers in the long run.
A turning point for ESG
In order to gain a deeper, more sophisticated understanding of ESG-related alpha drivers, analysts are increasingly leveraging big data and artificial intelligence for ESG information collection and analysis. While ESG scores provide a static view, alternative data provides more dimensions of insight. Technology and innovation are becoming key to successful sustainability practices.
Similar to our observation with big data in 2008, sustainability insights benefit investment decisions by predicting company fundamentals without needing to rely on traditional data sources. ESG-related data also provides a distinct way to capture how companies, within each sector and industry, are innovating and adapting to thrive as the economy transitions to carbon neutrality. This is just one of the many powerful alpha opportunities that can be uncovered with ESG data analysis.
ESG sits on the verge of a major turning point. Now, investors are able to measure sustainability on a much deeper level than simple screens based on value judgements. The availability of new sets of data and the ability to measure sustainability in unique ways have contributed to an increased demand in ESG-aware investing.
ESG data in practice
Transition insights identify how companies are preparing for the post-transition economy. Related data includes but is not limited to, carbon and water efficiency, and environmental innovation information.
Take the “E” in ESG, for example. While it may not be readily apparent, a company’s strong environmental policies could have long-term benefits to their bottom line as they work towards thriving in a post-transition economy. While there may be an assumption that the opposite is true – that companies who disregard environmental policies have lower overhead costs – ESG and profitability are inextricably linked. Looking below the surface, our data and analysis have confirmed a clear connection.
As consultants, we test and validate each insight through a rigorous research process, similar to scientific methods. This helps see past unsubstantiated environmental friendliness and basic ESG ratings. Most importantly, this scientific approach requires that findings are based in sound economic theory and that each ESG decision is additive to a companies’ bottom line.
If that is what you need we would be happy to work with you.
ESGWATCH Insights
Has been designed to provide information that is easy to understand about what is the most important theme of the decade. Whether your starting point is environmental, social or economics, in 2 minutes you will get invaluable information that you will not find anywhere else. We write about Environmental, Social and Governance what’s working now, trends, and opinions.