ESG Data Primer: Current Usage & Future Applications

Abstract

Against the context of needing to achieve a rapid and comprehensive decarbonisation of our economic systems, Environmental, Social, and Governance (ESG) data has emerged as the predominant mechanism for consistently recording, tracking and benchmarking corporate sustainability performance. ESG data is rapidly growing in availability and has become a key tool for assessing sustainability practices of companies, and facilitate socially responsible investors' capital allocation decisions.

Despite the increasingly mainstream use of ESG data, there remain many misconceptions and incomplete understandings, hence the need for the primer contained in this whitepaper. Moreover, under scrutiny we observe (potentially material) ESG data inconsistencies which could result in unintended investment allocations. We probe this issue closely to highlight that not only are there inconsistencies within and between ESG data providers, but also that there are inconsistencies in underlying data used by ESG data providers versus companies self-reported sustainability data.

Informed by our observations of the ESG data construction methodology, and the research use cases it has been used for, we outline an ESG data users’ action plan, distilling the most central points of focus for new and experienced ESG data users to keep in view when working with these data.

Keywords: Environmental Social and Governance, ESG, ESG Data, Reporting, Quality, Comparability