Before developing a strong ESG investment strategy, an organisation first needs to establish a powerful ESG data strategy to support investment pursuits. A challenge to this, however, is the quantitative nature and variability of data. Unlike other financial datasets, ESG focuses on more than just quantitative number-crunching statistics. It also relies on understanding a company’s actions and intentions. Thus in the process of analysing and understanding the data, several investment firms expend considerable time and resources, which can cause delays in closing deals.
Human-based approaches to data crunching – the process of preparing large volumes of raw data for analysis – relies heavily on analysts, which introduces human bias into your data, skewing ESG scores. Although most ESG data is not a factual qualitative, but rather represents a sliding scale of measurement, it is still essential to provide insights that are as accurate as possible. Without this, firms don’t have a true understanding of a potential acquisition’s ESG performance. As a solution, firms are increasingly embracing ESG reporting software to streamline their ESG data collection, distribution and management processes.
3 reasons why companies are seeking ESG software to manage portfolio data:
Long-Term Performance Monitoring
Purpose-built ESG software platforms like ESGCloud collect, track and analyse data and material ESG KPIs from portfolios on an ongoing basis. This performance monitoring is vital for understanding risks and opportunities long-term. Investors need access to current and correct data for both now and in the future to build a sustainable long-term investment strategy. A time-stamped dataset is not enough. ESGCloud enables performance data to be assessed continuously, rather than only isolated moments in time. This supports greater data accuracy. The insights derived serve as commencement points from which to improve ESG performance and meet obligatory performance requirements.
Trust relationships are vital to the conduct of business. The key is transparency. When an organisation openly shows that they have a well-rounded, sustainable business strategy, they have a greater likelihood of attracting capital from investors and being included in different ESG indexes. ESG reporting software like ESGCloud enables the customisation of different templates, questionnaires and data collection tools to ensure that the right data is collected. Once collected, it can be used to compare, benchmark and score ESG performances across various metrics and KPIs – by both the portfolio company and investor. Less information means less certainty for investors, with the transparency provided by ESG reporting software helping to mitigate as much investor uncertainty as possible.
Reduced ESG risk
ESG reporting software minimises the risks of incorrect data by ensuring data collection is consistent across all report sections. Information can be benchmarked, assessed and scored against pre-defined criteria using automated analysis tools such as scorecards. Based on the risks presented by the data, actionable solutions can be set to mitigate the risk, based on the nature of the risk itself. ESGCloud reporting software allows you to reduce noisy data and derive valuable data insights with minimal fuss.
The rise in the adoption of ESG software in contributing to a chaos-free ESG data system is undeniable. Organizations would serve themselves well by embracing software like ESGCloud when data crunching, as improved data effects better overall investments.