First-mover advantage may be a concept that will take a long time to prove in ESG data. The fragmented and fast-changing nature of the industry means the early adopters are still waiting to see if their speed out of the blocks has positioned them well for the future.
Data marketplace platform TickSmith is keeping a keen eye on the space, betting its expertise in helping data sources and providers to monetise their data will help bring order to the complex sector.
The Montreal-based company builds the technology for huge financial institutions like CME Group and Nasdaq to sell their data. Head of Product Nicholas Doyen believes that the unstructured nature of ESG data will require different distribution and licensing models to traditional capital markets products. And that’s where TickSmith sees huge opportunities for a company whose core business is showing others how to market their data.“While we’re not necessarily an expert on ESG data specifically, we are experts on how that data can be sold, can be exchanged and can be utilised,” Doyen says.
TickSmith’s Enterprise Data Web Store enables firms that generate or own large volumes of data to sell it on their own e-commerce sites. The company neither buys nor sells data, but provides the plumbing for those companies to set up their own online shops to showcase and sell their data to financial institutions.
It’s All Data
For TickSmith’s purposes, ESG data is no different to the other forms of information its platform supports. Once it’s scraped from sources and made usable, ESG data will be sold in the same way as all other data traded by TickSmith customers.
But Doyen says the company is committed understanding what makes the ESG data market tick so it can help clients sell the data products they put on their digital store shelves.
“An organisation that is looking to sell data has a responsibility to help the data buyer understand what the data is and how it’s going to be useful,” he says.
“But when it’s not machine readable, not super easy to distribute and generally in quite small volumes because it’s from, say, a PDF report – as is the case with ESG data – you have the difficulty of communicating what’s going to be in that data.
“It’s necessary that we can speak the language so that we can provide insight and suggestions on how to go to market on the ESG side.”
Immature Market
One of the drivers behind TickSmith’s interest is the scattergun approach that participants in the ESG space have been compelled to take in their data retrieval and disclosure processes.
With rules of the game still to be set, the industry is frantically trying to provide data to comply with every conceivable requirement without even knowing precisely what those requirements will be.
Vendors are buying and selling whatever data they can get their hands on and corporates are busy learning how to track KPIs on everything that might have the merest relevance to future disclosure rules.
“It’s a very challenging space to be in – most people don’t know exactly what they’re looking for, they don’t know what’s going to be relevant for regulations in the future nor for trading strategies,” Doyen says.
TickSmith is in the process of building tools that can help clients streamline the data sales processes, so that visitors to their online stores buy only what they need. The tricky part, Doyen concedes, will be enabling clients to showcase their products in a way that doesn’t give away too much of the data’s value.
“One of the things in data sales that happens right now is people just kind of throw up on the page and you’ll get these big long descriptions that somebody has to read through in order to actually understand what the data is – and they get lost in it,” he says.
“We’re looking to try and create frameworks through which you can streamline the comparison process, streamline the understanding process, make it very easy for that data buyer to have a full understanding of what they’re going to be getting so they can make the decision very quickly to pull the trigger and actually purchase that data.”
New Opportunities
ESG isn’t yet a top priority for TickSmith, but the company sees huge opportunities in the sector. That’s especially so considering it expects corporates to find future cost efficiencies by selling their own data directly, potentially bypassing vendors.
Also, Doyen sees potential for TickSmith’s involvement in a sector that’s likely to be structured differently than other data markets.
“Because of the complexities of the data management practice, of getting the data into a usable state, the industry ripe for a few key big players at the moment,” he explains. “But as we start to see the importance of ESG come into fruition, the small players are going to start coming in.”
That time may come sooner than later. Growing calls for harmonisation of reporting standards and the increasing oversight of regulators will pull at the loose threads of the ESG sector and bring order that will make it easier for new market entrants.
Consequently, TickSmith is closely watching what happens in Europe, the region with the most developed regulatory framework.
“We look at Europe a lot because they set the stage for what the regulations are going to do elsewhere,” he says.
“They give a guiding light to the data providers on what aspects they need to call to attention in order to make the data consumer want to buy that dataset.”
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