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Substantive Research Notes Strength of Start-Ups in Review of ESG Data Providers

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Substantive Research, which released an ESG Provider Dashboard back in June with a view to helping asset managers compare different aspects of ESG data providers and draw up shortlists of companies that meet their needs for ESG data and analytics, has published the findings of an independent survey of the evolving ESG data provider marketplace.

The report, ‘How to Combat Greenwashing? Find the Right Data Partner’, highlights key points including:

  • While many consumers of ESG data select well-established data vendors as their supplier, there is a rich and diverse ecosystem of providers beyond the big names
  • Start-ups (1-5 years in existence) already make up over a third of market supply, while mid-level (started 6-10 years ago) and established firms (started 10-plus years ago) constitute 24% and 37% respectively
  • Some 53% of providers are generalists, providing all three Environmental, Social and Governance data to clients, while 33% specialise in E, S or G
  • Of these specialists, 5% specialize in Social data, 70% in Environmental, and 25% in Governance
  • As asset managers develop their ESG processes they are likely to increasingly target specialists as they look to create their own ‘special sauce’.

The survey was carried among more than 300 data vendors ranging from new to market ESG data providers to encumbent firms.

Mike Carrodus, CEO of Substantive Research, says: “This research piece tells us the ESG data market is very young, although in our experience, asset managers are getting better at understanding opportunity cost. Most of our clients go to big brands to get something in place, then want to find out more about what the market has to offer. We can help here.”

Substantive Research’s ESG Provider Dashboard covers 140 to 150 firms able to supply appropriate ESG data to asset managers and the company is talking to more. Carrodus comments: “My guess is that we have covered a half to two-thirds of the market, so we will keep going with due diligence of providers, identifying providers with transparent ESG research methodologies, and offering potentially useful shortlists of providers to our asset management clients.”

As well as offering the services of its dashboard, Substantive Research is moving on to meet additional client requirements including deep digging into potential ESG data providers. Carrodus says: “This is not just about what they can do, but who they are.” Clients are also interested in how others are using providers. “We can aggregate this data on an anonymous basis and we may find, for example, that a provider has good data but does not have APIs, and this is how previous users have found a way around this.”

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