Decentralizing Data Management Across ESG and Impact Investing

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As long-standing global crises accelerate and new crises continue to emerge, a new, more conscious generation of investors increasingly expects their capital to create positive environmental and social impact.

These investors now represent a sizable segment of the market: As of 2020, around US $2.3 trillion in capital had been deployed to impact investments, while by 2025, a projected US $53 trillion, representing one-third of global assets under management, will be classified as ESG (environment, social and governance) investments.

Today’s generation of investors is motivated not only by the opportunity to make an impact, but by a growing amount of data showing that companies that focus on sustainability also tend to perform well financially. For instance, a 2021 BlackRock report revealed a close linkage between company indicators focused on advancing the SDGs (Sustainable Development Goals) and those that are associated with positive long-term financial performance, finding an overlap of as much as 70% between these indicators. On the opposite side of the ledger, the report found that for many of the issues addressed by the SDGs – in particular gender equality, biodiversity cambodia whatsapp number data loss, and violence and armed conflict – the cost of not achieving the goals is far greater than the cost of action.



The Trouble with ESG Ratings
However, this new generation of sustainable investors can’t direct their capital toward businesses that are truly making a positive impact on people and our planet without reliable data. That’s where ratings and regulations are falling short.

In December 2021, Bloomberg released a podcast and article, both titled “The ESG Mirage,” which argued that “MSCI, the largest ESG rating company, doesn’t even try to measure the impact of a corporation on the world.” Instead, Bloomberg’s analysts argued, the company’s ESG ratings are more focused on assessing the impact of the world on a corporation’s profits and shareholders, resulting in a system in which superficial efforts toward sustainability (and even rudimentary business practices) can produce a positive rating – even if the company’s negative impacts far outweigh them. As the article put it, “almost 90% of the stocks in the S&P 500 have wound up in ESG funds built with MSCI’s ratings. What does sustainable mean if it applies to almost every company in a representative sample of the U.S. economy?”