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Investors have continued to sound the alarm over the quality and fragmentation of ESG data in 2020, yet the market has exploded with providers offering data sets on every sustainability trait imaginable. So what gives?
First, not all ESG data is created equal. At company-level, the gold standard is still information which is disclosed directly by firms. A recent study on corporate carbon emissions, a commonly used data point, found that self-reported data is 2.4 times more accurate than estimates provided by third parties. Researchers concluded that the current reliance on estimated emissions in some cases made investors highly susceptible to greenwash.
This is a problem. Only a fraction of companies choose to report sustainability information, and the rules governing the topic are loose in most jurisdictions. This is …