Overcoming the Challenges of Assessing Sustainability with On-Demand Research
The Complex Regulatory Landscape
Sustainability is becoming an increasingly important factor for both professionals and individuals to consider when deciding where to invest their money. However, finding reliable and comprehensive impact data can be challenging, as traditional ESG providers often fall short due to inconsistencies in methodologies, lack of transparency, outdated information, and reliance on self-disclosed data. However, one of the most significant challenges for investors is the industry’s focus on large-cap companies and developed markets, leaving small and mid-cap companies, private companies as well as emerging markets, underrepresented. This limited scope can lead to incomplete assessments of the global landscape.
Bespoke Sustainability Research?
The demand for bespoke impact research has grown due to evolving customer expectations in regard to sustainability, and the shifting regulatory landscape, such as the European Union’s Sustainable Finance Disclosure Regulation (SFDR). New regulations such as SFDR are driving change from a traditional ESG approach to a more impact-focused model. These regulations ensure that financial institutions provide transparent and accurate information on the environmental and social impacts of their investments through sustainability reporting.
As previously mentioned, financial institutions and ESG data providers often lack a comprehensive methodology to assess important sustainability factors effectively. Many financial institutions have only recently started their sustainable investment journey and might have limited knowledge and necessary resources on how to analyse the impact of the companies they are investing in. ESG and other sustainability data reporting can be complex and challenging to navigate and understand. This has created an opportunity for impact data providers to fill this gap. Additionally, many data providers may not be covering every company, or every aspect of a company’s impact, making it difficult to comply with the regulatory requirements and justify investments in Articles 8 & 9 funds.
Morningstar’s (source) data shows that 40% of funds in the last quarter of 2022 had to downgrade their funds from Article 9 to Article 8. This highlights the complexity of justifying investments through the sustainability data available.
Can on-demand research be the solution for you?
As a quickly growing impact fintech powered by collective intelligence, Impaakt has built a large community of certified impact analysts who can deliver timely, thorough, reliable, and dynamic research on the impact companies have on the planet and society. This innovative approach offers the flexibility to assess all types of companies and region-specific firms in real-time.
Impaakt leverages and mobilizes its community of contributors to research and assess specific topics and companies for financial institutions. This on-demand impact research provides coverage on critical environmental and social topics, providing impact summaries and a number of hand-picked quantitative data points. Whether the goal is filling in the company gaps, the topic gaps, or simply re-assessing companies, Impaakt’s community provides unbiased, transparent, and opposable research and scores.
If the data exists, Impaakt can extract it or use a robust methodology to make educated and accurate estimations. In cases where neither of these options is feasible, Impaakt generates peer-based scores allowing the gaps to be filled temporarily until real data can be retrieved.
What sets Impaakt apart?
One of the standout features of Impaakt’s service is the granularity of its scores. Many data providers today focus mostly on a company’s externalities and are very often geared towards measuring risk. This results in leaving out critical factors such as the impact of a company’s products and services.
Impaakt’s focus on analysing the impact of a company’s products and services is crucial as it provides a more comprehensive understanding of a company’s overall contribution to sustainable development. Focusing solely on externalities, such as environmental emissions or labor practices, may overlook the potential positive or negative effects of the company’s core offerings on society and the environment. Impaakt’s unique mix of quantitative and qualitative research and scores generation both on products and services goes beyond traditional process-focused data to reveal a more complete view of what truly matters.
Impaakt’s on-demand research also offers a range of unique features, such as Collective Materiality Assessments, based on the assessments of our community of Raters, and Framework Mapping to ensure the most relevant topics are being covered depending on the company’s SASB industry. Impaakt’s Product-Related Scores allow for a multi-dimensional view of how a company’s products or services impact the world. The Peer-Based Scores also provide an interpretation based on industry peers when data is unavailable. Such features help investors gain a deeper understanding of a company’s impact.
Impaakt’s fully customisable approach offers solutions for every type of customer. Just recently, we helped one of our clients, a well-known top European asset management firm, comply with the new SFDR regulatory requirements by producing impact research on more than 231 small private companies, including bonds and equities, that were not covered by competitors.
Overall, Impaakt’s on-demand research service is a game-changer for sustainable investors who want to make informed decisions and comply with evolving regulations based on comprehensive impact data. It can support fund managers in filling in the gaps for companies not yet covered by other providers as well as complementing existing data through Impaakt’s granular approach. By providing customised impact research, along with its unique features, Impaakt is making it easier for investors to align their investments with their values and make a positive impact on the planet and society.
