Pointers for those building ESG data products

Here’s a note from Nawar Alsaadi:

If you are building an ESG data product, these data points from JP Morgan and Opimas should be of value to you. Since 2016, the ESG data market has been growing at 20% CAGR and is projected to reach $2.1B this year, or 14% growth compared to 2023. In terms of market share, MSCI is the largest ESG data provider with 25% market share, followed by S&P Global at 16% and ISS ESG at 14%. MSCI dominance is even more pronounced in ESG funds benchmarks, with over 50% of the largest ESG funds utilizing an MSCI index benchmark.

Of note, the industry growth is tightly linked to regulations, with the SFDR enactment leading to a major surge in ESG data demand in 2021/2022 as asset managers had to fill in data gaps and track controversial business activities at scale. CSRD/ESRS doesn’t necessarily offer the same upside for ESG data aggregators, and is likely to benefit ESG management and disclosure companies such as Position Green that offer tailored ESRS reporting solutions.

ESG data and solutions startups should closely track regulatory developments and understand the resulting business compliance obligations when developing their ESG-related offerings. Tools only focused on sustainable value creation wont enjoy the same traction as sustainable compliance tools. Based on my extensive interactions with a host of sustainability/ESG solution providers, I can confidently state that ESG regulations are the predominant reason as to why a business executive would sign a check for an ESG-related solution.