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Slow to Start, Banks are Buying into ESG Data Companies

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Goldman Sachs has become the latest major bank to buy an interest in an ESG data company as lenders worldwide grow their sustainable finance businesses.

The New York-based banking giant’s US$75 million investment in building energy management firm Gridpoint follows a number recent similar deals, including last year’s purchase of data-driven ESG fintech platform OpenInvest by JPMorgan. Also this week, Minneapolis-based US Bank said it would begin using Sustainalytics data, research and reports to feed in-house ESG analytics operations for its US Bank Global Fund Services.

Banks are positioning themselves to benefit from the growth of ESG funds and assets, which Bloomberg estimates will be valued at $53 trillion by the end of 2025. But observers say lenders have been slow off the blocks to harness the growing volume of ESG data. One market participant who preferred to remain anonymous suggested lenders had only just begun to realise the value of data after building non-data teams to run ESG initiatives.

Gridpoint uses data analytics to help building managers reduce their carbon footprints by efficiently connecting them with energy grid providers. The proceeds of the investment will go towards developing the company’s data analytics, intelligent automation and machine learning capabilities, it said.

“By leveraging extensive data, automation and controls to continuously optimise building assets, GridPoint’s platform provides immediate energy savings to customers and a gateway to integrating additional grid-interactive assets like EV chargers, generators, and storage,” Goldman Sachs Asset Management Managing Director Vikas Agrawal said in a statement.

Data Struggle

The need for banks to invest in ESG data was underlined last year at a S&P Global Market Intelligence conference in which bankers admitted they needed to get a grasp of data flows.

The panel heard how banks were struggling with finding the data to help meet demand for sustainable investments from their customers. A poll conducted at the event found that banks lacked resources, knowledge and the means of measuring ESG performance.

Recognition of banks’ efforts came late last year when Euromoney said while lenders are largely relying on third-party providers until “data standardisation or consensus” emerges, a few in the banking sector “can claim to be grappling with the problem”.

It named BNP Paribas as the world’s best bank for ESG data and technology at its Awards for Excellence last year, saying the French lender has stood out for not only gathering its own data but also making it open source and publicly available.

“Transparency and reliable data are crucial to ensuring that sustainable finance remains a positive force,” Constance Chalchat, Head of Company Engagement for BNPP Corporate and Institutional Banking (CIB) was quoted as saying at the time. “To combat greenwashing you need accurate, standardized data and comparability within a sector.”

Other banks including HSBC and Deutsche Bank have since joined the open source route via third-party provider Arabesque’s ESG Book, which in December offered to pubic view the disclosures of 9,000 companies. The service is designed to connect stakeholders, enabling them to request, disclose, share and map ESG data in real time.

Banks also have been buying into alternative data sources. Early last month JPMorgan Asset Management hired a third-party forensic data provider to examine soils samples to help it ascertain if cotton used by clothing companies had been made in blacklisted countries.

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