Emerging Challenges of ESG Analytics
New and evolving ESG issues and their impacts, in 2023, now pose emerging challenges that investors who wish to maximize returns for their investors must address on the ESG front. They highlight the importance of incessant adaptation of ESG frameworks...
Several challenges have persisted in ESG analytics for investors. As we have laid out in detail in our ESG Information Systems White Paper, the qualitative nature of ESG data combined with inconsistent data availability and quality has been the main difficulty for investment-oriented ESG analytics. New and evolving ESG issues and their impacts, in 2023, now pose emerging challenges that investors who wish to maximize returns for their investors must address on the ESG front.
In the last couple of years, sustained supply chain disruptions, rising energy cost, accelerating military build-up, and in some cases direct armed conflict have brought some new ESG issues to the fore, while the importance of ESG for long-term profitability has been tested. For example, locally-sourced renewable energy is also more reliable and cost-effective for many industries with high energy usage. Companies that prioritized supply chain sustainability have experienced fewer disruptions and, interestingly, less exposure to cost fluctuations. More recently, cybersecurity and data privacy have also shown themselves to be critical in avoiding business shutdowns.
These emerging challenges in ESG analytics highlight the importance of incessant adaptation of ESG frameworks and methodologies. To achieve this, ESG analytics service providers must maintain close working relationship with key stakeholders such as investors, companies, regulators, and standard-setting organizations. They should also adopt NLP-based self-learning models that monitor main social media outlets such as Twitter to keep in touch with the evolving public opinion and to catch whispers of high-impact events.
To this end, investors who have adopted the type and scale of ESG information systems that we at VOGOSEN design, develop, and deploy, and that we have detailed in our White Paper, are out-performing the market. It is another strong argument that ESG for investors is not merely a ruse to access public funds; it can be a pivotal component of a legitimate investment strategy.
