ESG research firms gaining in popularity, influence

October 6th, 2016 by Dakota Software Staff Industry News

The importance of corporate sustainability continues to increase for businesses, consumers and investors. Sustainability news site Green Biz pointed out that the demand for information about sustainability has led to increased use of environmental, social and governance research firms by investors and other interested parties. The information provided by these research groups informs investors large and small, who use it to compare the environmental and social impacts of investing in companies in the same geographic area or similar markets.

The use of ESG firms is a way for investors to generate consistent comparisons between the different reporting methods and styles used in the individual sustainability reports generated by a variety of businesses. Because ESG researchers normalize the relevant data and condense information, investors who don't have the time or resources to complete the high-level analysis needed to determine the environmental responsibility ratings of many different companies flock to these firms. For many businesses, this puts the sustainability report into a new light. Not only are consumers and investors reading the reports themselves, but groups performing research on the investors behalf are mining the reports for data to be used in presentations. ESG firms are also contributing to rankings of sustainable businesses and issuing awards to companies that meet or exceed certain benchmarks in that realm.

ESG firms growing in recognition and power
Investment news site ValueWalk reported on the rapidly rising popularity of ESG-based investing. The source noted the United Nation's list of business signatories to its Principles of Responsible Investment has grown tenfold, from 100 to 1,000, in the past eight years. The current list of PRI-committed companies represents approximately $45 trillion in assets, which is approximately a third of all managed investments worldwide.

The steadily rising demand for sustainability information, and the expectation that investments will be made in an environmentally and socially conscious fashion, has led to the creation of an information industry around corporate sustainability. Research firms are paid to tell investors, governmental agencies and others how different businesses compare to each other in terms of environmental impact - a development unthinkable just a few decades ago. Companies that want to improve their positions as conscious corporate citizens and attract investors need to have the right system in place to collect and produce information. Sustainability software can make reporting more efficient and accurate, helping businesses become more responsible.