Vogosen's 5C Framework to Building A Scalable ESG Information System
Vogosen proposes a 5C framework to building an effective ESG information system. Here, we cover the first two steps: 1. Categorize and map data sources, and 2. Centralize access to data with database and APIs
Today, most investors rely on specialist providers to access both row and processed ESG data. However, as the ESG field is becoming more complex and sophisticated, it is increasingly valuable for investors to have internal research and analysis capabilities on top of the available data sources. This is where a sound information system gives investors a competitive advantage.
Vogosen's 5C framework
Vogosen has developed a simple yet coherent 5C framework that leverages cutting-edge technologies in data science and machine learning to help investors organize ESG data at scale and to develop a solid ESG information system progressively:
- Categorize and map data sources
- Centralize access to data with database and APIs
- Clarify the analytical outputs
- Create analytics workflows from inputs to outputs
- Convey the right information to the right user at the right time
In this article, we briefly tackle the first two steps related to categorizing and centralizing access data sources.
1. Categorize and map data sources
Investors must maintain a comprehensive view on not only their current data usages and needs but also their future ones. Data should be mapped to ESG and investment decision processes from broad (i.e. specific funds) to narrower (e.g. portfolio simulation, engagement preparation) categories.
In other words, you need to keep track systematically of (i) what data and sources you use for each activity and each internal process, (ii) for which internal or external clients these data and sources are used, and (iii) what is the historical evolution of your own practices and how they correlate with new data sources that you want to explore.
This step is key for your internal ESG integration and information system design.
2. Centralize access to data with database and APIs
Before data can be analyzed, relevant information must be collected and organized in a safe, stable, and efficient way. Data organization, and thus accessibility, can be challenging if no data system is deployed, especially when most investors rely on heterogeneous data providers.
Although Excel sheets might seem sufficient, they are neither fluent nor secure nor sustainable. Other technologies, ranging from simple SQL databases to complex data warehouses, can assist data organization and usage. A database will also enable automated data collection, integration and updates, as well as the development of internal analysis approaches and user-centered applications.
What is also important to improve and streamline the exploitation of ESG data is to harness API services, which are today offered by nearly every data provider in the market.
