ESG performance tracking has become a cornerstone of responsible investing and corporate governance. With global ESG assets under management reaching USD 38 trillion in 2022 and 88% of limited partners incorporating ESG metrics into investment decisions, the demand for robust ESG disclosure is stronger than ever. 60% of institutional investors increasingly recognize that ESG investing correlates with stronger performance, with better yields from ESG-aligned portfolios. This shift reflects both market expectations and regulatory pressure: 76% of asset managers support stricter ESG disclosure requirements, and 72% of investors now assign ESG-related goals at the portfolio level.
Beyond ESG Fundamental Disclosures: Why Tracking Alternative Data is Essential
But it’s not enough to disclose ESG performance data once a year. What stakeholders seek is evidence of continuous improvement. ESG analytics, monitoring, and performance evaluation must be ongoing and methodologically consistent. Investors don’t just want to know the current ESG score; they want to know if a company is improving year over year, taking concrete steps toward sustainability. In this environment, ESG tracking becomes not just a compliance measure but a driver of operational efficiency, investor trust, and competitive advantage.
While traditional fundamental data, such as corporate ESG reports, regulatory disclosures, and audited financials, forms the bedrock of ESG assessment, it has critical limitations. Chief among them is the lack of standardization. Companies use different frameworks (e.g., GRI, SASB, TCFD), which hinders comparability. Moreover, ESG data is often backward-looking and published infrequently, usually once or twice a year. This limits the ability to capture dynamic changes or respond to emerging risks in real time. Another issue is self-reporting bias. Companies have discretion over what they disclose, often emphasizing favorable data while minimizing negative aspects. Materiality also varies: what’s financially material may not align with what’s socially or environmentally significant. These gaps create blind spots for investors, who risk making decisions based on incomplete or outdated information.
Alternative data fills these critical gaps by offering timely, objective, and high-frequency insights that traditional sources miss. These non-conventional data sets, ranging from satellite imagery to social media analytics, can capture ESG indicators with greater granularity and immediacy. For example, satellite imagery can detect environmental degradation like deforestation or water pollution in near real time. News sentiment and social media analytics can provide early warnings of controversies, while sensor data can continuously monitor air and water quality. Supply chain data can expose human rights violations or unsustainable practices in upstream operations. Together, these sources reveal both the “what” and the “how” of ESG performance – what’s happening on the ground and how stakeholders are reacting. With alternative data, investors gain a more holistic and dynamic understanding of ESG performance. They can identify risks and opportunities as they emerge, hold companies accountable, and align investment decisions with long-term sustainability outcomes.
Filling the Gap between Traditional and Alternative ESG Metrics
As ESG regulations and expectations intensify, bridging the gap between traditional and alternative ESG insights has become essential. Fundamental data such as corporate disclosures and regulatory filings must now be complemented by alternative sources like patent activity, social sentiment, news feeds, supply chain metrics, and employee reviews. Combining these diverse inputs creates a multi-dimensional, actionable view of sustainability performance. By analyzing patterns, flagging risks, and identifying inconsistencies that might suggest greenwashing, this hybrid approach empowers investors to make more informed decisions, combining transparency with depth. To support this, Neoimpact has developed a comprehensive ESG Intelligence Dashboard that integrates both fundamental and alternative data. Leveraging AI and machine learning, the dashboard generates real-time ESG scores, enables portfolio-level ESG goal setting, identifies underperforming assets, and supports engagement strategies that drive real improvement. Interactive features also allow users to track ESG performance over time and benchmark companies across sectors.
In summary, effective ESG performance tracking requires more than traditional reporting. Fundamental data, while important, is often inconsistent, backward-looking, and incomplete. Alternative data sources provide the granularity, timeliness, and objectivity needed to fill these gaps. Together, they offer a more complete picture of ESG performance. Tools like Neoimpact’s ESG Intelligence Dashboard exemplify how the fusion of these data types can drive continuous improvement, mitigate risk, and unlock sustainable value. As ESG integration matures, the focus will increasingly shift from reporting to real-time responsiveness, creating a future where impact is not only measured, but managed proactively.
