Governance, risk and compliance advisory firm ACA Group has updated its ESG data management platform to provide more flexibility to its private investment clients.
The New York-based company has retooled the ACA Vantage for ESG platform it launched in 2022 after acquiring ESG data specialist Ethos. The new iteration enables greater configuration of data and analytics to suit specific use cases and strategies.
ACA Vantage for ESG is artificial intelligence (AI)-enabled and used by thousands of the company’s clients. While public market clients make up the majority of the company’s customers, growth in uptake has been greatest in private-market participants, said ACA Group partner Dan Mistler. The enhancements, which were implemented based on feedback from users, address the needs of this expanding client base.
Greatest Needs
ACA Vantage for ESG offers improved data quality capabilities by bringing together the information that private clients need most.
“There’s been historical difficulties in being able to serve those types of strategies with the issued data,” Mistler told Data Management Insight. “But once you break this down to the constituent parts, it makes coverage not a problem anymore.”
The SaaS-based tool enables the seamless use of ESG data from collection through to analysis and reporting and is built on a model of providing clients with only the data they need for their specific use cases.
The data collection methodology is built on four pillars (publicly available and third-party data, directly collected data from companies, estimated and modeled data, and directly measured satellite data), and the ability to piece data across the pillars to identify the best available data by metric is key to how the tool is differentiated.
It permits the integration of data from multiple sources, provides more powerful analytics and simplifies disclosure processes applicable to hundreds of reporting frameworks. It also incorporates the company’s Carbon Wayfinder tool for calculating carbon footprints along PCAF standards.
“Many ESG solutions are built for maybe one type of strategy, for example LBO private equity or wealth asset and management… and as a result, they’ve built things that kind of keep data in silos,” Mistler said. “What we see, which is more problematic, is that they take the same approach for one strategy and try to cram it into addressing a different strategy … which typically just doesn’t work.”
Disaggregation
ACA Group believes that the one-size-fits-all approach to ESG data that has characterised the larger vendors until now is no longer fit for purpose. As sustainability processes have been embedded across financial institutions’ enterprises, the use cases for the data has multiplied.
The disaggregation of ESG data that has seen smaller vendors offering niche datasets and feeds had been predicted for some time. This has been driven in part by a growing distrust of sustainability ratings, which had served for many years as the key source of ESG guidance and risk management for many investors.
While the enhancements to ACA Group’s platform have been largely focussed on meeting the needs of private and alternative market investors, Mistler said that public market participants were experiencing greater frustration with their ESG data capabilities. These companies have greater legacy issues that private investors who are relatively new to ESG don’t have, he said.
A common complaint among institutions has been the inflexibility of some contracts, which have left them saddled with data feeds that that no longer fit their needs.
“That is also a major opportunity for us, because I think managers want ESG technology that is easier to use, that fits their use case and is more economically friendly,” Mistler said.
Growth Prospects
Most f ACA Group’s customers are US based. Despite political pushback against sustainability strategies in the US in recent years, Mistler believes that the ESG data space is in good shape.
The reassessment of ESG has forced fund manufacturers to be more accurate in their mandates and investors have begun to question managers over their funds’ sustainability claims. It’s also led institutions to examine where they can get most value from their ESG data.
Even with a second climate-sceptical Trump administration about to take up residence in the White House, Mistler believes that there will be greater demand for the sort of customised ESG data capabilities that ACA Group offers.
The re-examination of the space has provided “very healthy change”, he said. “It has really weeded out greenwashing and the tons of managers that had been saying a bunch of fluffy things that they shouldn’t have been.”
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