Today $30-40 trillion in assets under management globally are held in ESG related funds and this is predicted to grow to $35 and $50 trillion by 2030, accounting for ~25% of global asset management AuM.
Furthermore sustainability disclosure regulation is increasing with the EU leading the way with frameworks such as Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD), mandating detailed ESG disclosures from companies. Other regions, including the U.S., the U.K., and Australia, are introducing similar legislation.
Startups and established financial data providers have come up to serve this market with solutions including ESG Ratings, Benchmarks, Risk Assessment, Opportunity Identification, and Transparent Reporting.
Players like MSCI for instance focus on decision support tools and services for the global investment community, with a strong focus on benchmarks, analytics, and data solutions, including ESG research and ratings.
Still challenges exist around data consistency (not an official ESG guideline), data subjectivity, data complexity (for sourcing, tracking and analysing), transparency (e.g. greenwashing), data availability (especially SMEs and startups).
AI is increasingly key in the sector to automate data collection, and reporting, and provide real-time insights for better compliance and decision-making. Still human-in-the loop or curated data collection is often needed.