Xignite, whose data APIs have helped fuel the fintech revolution, has entered the ESG space.
A surge of inquiries during the coronavirus pandemic and growing regulatory oversight has convinced the company to offer ESG data scores and metrics to its customers.
The San Mateo, California-based provider of data distribution and management solutions for financial services and technology companies is now offering ESG data from Arabesque, the company behind ESG Book. Xignite Product Manager Katya Obyedkova said the partnership came about as a result of a growing clamour for sustainability data.“Throughout the pandemic, we saw an increased inbound amount of requests for ESG data, and there a growing sense of urgency for offering ESG products,” Obyedkova told ESG Insight. “Every time you read news, there is an ESG component to it and I think the pandemic got everyone thinking “how do I make an impact and how do I align my investments with my values?
“Maybe that just made people more aware and more willing to put their words into actions.”
Formed in 2006, Xignite made its name building APIs for its more than 1,000 broker and wealth management clients. Its most recent product is XigniteGlobalESG, uses Arabesque’s core ESG data feeds. Germany and UK-based Arabesque is the data and asset management company that created ESG Book, an ambitious sustainability data project that offers some of its information for free and is backed by financial giants including HSBC and Deutsche Bank.
Via Xignite’s API distribution system clients will receive ESG scores as well as data on temperatures, emissions and corporate involvement in controversial activities. Among Arabesque’s suite of ESG scores are those based on the United Nations’ Global Compact, which formulates pathways for companies to achieve environmental, social and anti-corruption targets.
The API is aimed at helping brokers and wealth managers engage their own clients in sustainable investment products.
“It felt like the right time to do it because millennials and Gen Z is so concerned with making sustainable choices and investments that are aligned with our values, so we started looking for a partner,” said Obyedkova.
Bias Elimination
Xignite said it chose Arabesque for many reasons, among them the company’s use of algorithmic calculations and artificial intelligence to compile ESG scores, which Obyedkova said prevented the inclusion of biases that can creep into analyst-built scores.
Clients will be able to access some of the raw data behind the scores and Xignite will also enrich the content with the use of additional screeners and advanced API functionality to improve the useability of the information.
“Our APIs, our endpoints, are designed so that no matter what your use cases you can get started and launch really quickly,” Obyedkova said. “Nobody wants to spend six months or a year developing their own technology stack and then add new datasets. If you’re already using the Xignite platform, adding a big data set is extremely easy.”
The recent announcement from the US financial regulator that it would begin forcing companies to disclose their climate risk and impact data was also a catalyst to Xignite’s decision to enter the ESG space. The decision by Securities and Exchange Commission (SEC), which oversees the activities of companies in the world’s largest economy, has proved a major force in galvanising ESG uptake.Although trailing its European counterparts by years in adopting sustainability reporting rules, it’s move is widely expected to prompt other regulators around the world to follow suit.
“It definitely helps to build momentum and keep ESG top of mind for all the investment and wealth management firms,” said Obyedkova.
Xignite will closely watch the performance of its new product. The company has had to adapt its processes to make the data useable and comparable for clients and also to address the different methodologies that go into creating the scores.
Obyedkova said that Xignite would monitor demand patterns and work in conjunction with Arabesque to adapt to changing needs.
“They are really listening to what the market needs and wants, and we want to continue working with them to expand our offering with them,” she said. “Hopefully we will grow together and continue listening to what the market needs and offer more products.”
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