Every investment needs a benchmark. Broadly, the assessment involves comparing one’s performance against peers, sectors, countries, or global standards such as the Paris Agreement. Studies have found that a majority of investors (85%) reported that investment decisions keeping ESG benchmarking in account lead to better investment returns, more resilient portfolios, and improved fundamental analysis. With global ESG assets exceeding USD 30 trillion in 2022 and expected to surpass USD 40 trillion by 2030, ESG performance comparison has become an essential part of modern portfolio management.
The Growing Importance of ESG Benchmarking
Given this exponential growth in ESG investments aimed to align with the Paris Agreement goals and comply with global social standards, this becomes more imperative to have continuous review of investments and benchmark against various levels. This includes benchmarking among:
- Financial instruments such as bonds, equity etc.
- Company level investments
- Sector level, such as healthcare, energy
- Portfolio level
- Regional or country level.
As the investment industry gets more sophisticated, ESG data is becoming increasingly abundant. In 2022, 98% of S&P 500 companies disclosed ESG information, and 70% of them obtained limited assurance. ESG data analysis for investors has become far more accessible through advanced databases. These databases are either paired with in-house ESG comparison strategies or used to develop proprietary ESG benchmarking tools that rate and rank companies into categories such as leading, average, or lagging.
Using Reliable ESG Intelligence Tools for Benchmarking
This classification helps investors in ESG performance comparison and supports more accurate investment outcome tracking. Despite the wealth of data, several challenges remain – particularly regarding data quality, integrity, validation, and comparability. Inconsistencies and exaggerated sustainability claims—often referred to as “greenwashing” – contribute to “background noise,” making it difficult for investors to separate genuinely sustainable companies from those that merely appear so. Hence, the need for reliable ESG benchmarking tools and better ESG data analysis for investors is becoming increasingly clear.
To address these challenges, the use of alternative data in ESG is gathering momentum. Typically, alternative data refers to externally sourced information about a particular company to gain additional business insights. Common alternative data types include customer credit and debit card transactions, emails, geo-location (or foot traffic) metrics, mobile application usage, satellite or weather data, social and sentiment data, web-scraped data, and generic internet traffic, among others.
Integrating alternative data-based analytics at scale can be significant for effective risk management. It allows investors to use sentiment to augment fundamental analysis, and to monitor changes over time. Thus, when aggregated and analysed, alternative data can provide valuable insights as part of a micro or macro analysis for companies. This layered approach strengthens sustainable investment outcomes and provides a robust foundation for investment outcome tracking and portfolio benchmarking.
How NeoImpact’s ESG Intelligence Dashboard can Improve Sustainability Performance
An ESG assessment tool combining fundamental and alternative data can offer a comprehensive view of a company’s sustainability performance. It would integrate traditional financial metrics, regulatory disclosures, and ESG reports with alternative data sources like patents granted, social media sentiment, news analytics, supply chain transparency, and employee reviews. Moreover, the tool could use AI and machine learning to analyse patterns, flag risks, and provide real-time ESG scores. Interactive dashboards enable ESG performance comparison, time-based tracking, and detection of greenwashing. This hybrid approach enhances transparency and enables more informed, data-driven investment decisions aligned with long-term sustainability goals.
Neoimpact’s ESG Intelligence Dashboard exemplifies this hybrid approach. It provides both fundamental and alternative ESG data, empowering investors with deep, multi-dimensional insights. This dashboard allows users to perform ESG data analysis across sectors and geographies, benchmark companies against industry standards, and visualize changes in ESG scores over time. It supports ESG comparison strategies by evaluating company-level ESG risks and opportunities, offering strategic intelligence that improves ESG investment returns and aids in building more sustainable portfolios.
In summary, ESG benchmarking tools are key to effective portfolio benchmarking and ESG performance comparison. Combining fundamental and alternative data improves ESG data analysis and helps investors make informed decisions and helps them compare ESG performance with peers. NeoImpact’s ESG Intelligence Dashboard illustrates how advanced analytics can drive sustainable investment outcomes and reduce greenwashing. Looking ahead, increased use of AI-driven ESG comparison strategies and real-time investment outcome tracking will support better ESG investment returns and promote more responsible investing.
