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ESG Consultancy Growth Driven by Investor Data Demand

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A string of sustainability consultancy deals and product launches highlights a growing trend among companies to engage outside help to boost their ESG performance – a trend that a recent survey found is being driven mostly by investors.

Last week financial services provider Apex Group launched an ESG advisory and reporting unit called Holtara, built with MJ Hudson, the data and analytics company it acquired last year. Also last week, sustainability advice giant Anthesis merged with corporate strategist Revolt to better serve clients as they seek to build decarbonisation and other sustainability policies. And global climate consultancy Carbon Trust underwent a change of management with the appointment of UK Climate Change Committee (CCC) head Chris Stark as its new chief executive.

The profile of ESG consultancies has risen as asset owners and managers have increased pressure on companies to improve their sustainability reporting capabilities. While they have been driven by their need for good data to inform their investment strategies, they are also subject to regulatory reporting requirements that are only now being applied to non-financial firms.

“Recent years have seen greater political and shareholder scrutiny of ESG claims, resulting in the urgent need for accurate data, transparent reporting and meaningful sustainability commitments,” Apex head of ESG product Emma Bickerstaffe said at the launch of Holtara, which she will lead.

“We recognise the importance of combining platform and people services to not only simplify and streamline ESG reporting, but also to ensure expertise is on hand to help clients focus on the most material topics, verify collected data and prioritise initiatives to improve performance year on year.”

Growing Sector

ESG consultancy offerings are growing beyond the traditional large professional services companies such as EY and PwC, who have been providing broad sustainability know-how for many years. Smaller consultants have emerged offering expertise in specific subject areas, such as biodiversity-focused Nature Positive. Also, specialist industry consultants have expanded to offer sustainability advice, including architectural advisory Sweco.

According to estimates by research firm Verdantix, the sustainability consultancy sector will have grown 27 per cent annually between 2022 and 2028, increasing from US$11.5 billion to about US$49bn. Expansion will be more pronounced in Europe, where there is greater regulatory oversight of ESG performance among companies.

UK-based Verdantix, which surveyed 400 sustainability executives to arrive at its estimates, said that lion share of growth had come from companies needing data to satisfy investor and regulatory demand. Investors are “really starting to prioritise sustainability”, Alessandra Leggieri**,** ESG and sustainability analyst at Verdantix, told a recent webinar hosted by the company.

The fastest growth in the sector is expected in Europe, at 29 per cent annually. This is attributed to the introduction of the Corporate Sustainability Reporting Directive (CSRD), which will compel about 50,000 European firms to disclose detailed data on their ESG performance.

They are expected to seek help in submitting reports aligned with European Sustainability Reporting Standards (ESRS), which will expect from this year firms to provide more than 1,000 data points across climate change, biodiversity, the circular economy and other markers.

Welcome Help

Panellists on an A-Team Group webinar in June that was focused on standards and taxonomies discussed the use of consultants as CSRD loomed. Bodo Windmöller, senior vice-president of product management at RegTech provider Regnology, said consultants had become a part of the ESG landscape. Companies are seeking “specialised consulting services” because they need a “very deep level of expertise on ESG topics” he said.

Fellow panellist Panagiota Balfousia, head of sustainable business strategy at asset manager Kieger AG welcomed the development. She said that consultancies “will be needed in some part of the journey” to help companies navigate the complexity of partnering with multiple service providers, a core needs as they develop their reporting capabilities.

Another finding of the Verdantix survey indicated that companies are looking to shore up their reporting strengths across all pillars of ESG. Priyanka Bawa, ESG and sustainability industry analyst at the company, said that consultants whose specialities cut across all topics, such as those focusing on supply chains, are commonly being hired.

The survey found also that the services companies are engaging are increasingly data-focused. They are harnessing information and technology – including AI analytics – to better understand and mine insights from their own data.

Companies are using consultants to seize ESG opportunities “such as increased access to capital that comes with good ESG performance”, Leggieri said.

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