The idea of environmental and social governance (ESG) is well established as a strand within the investment world. The environmental bit focuses on the level and sophistication of, for example, management systems, pollution control, resource efficiency and carbon reduction. The social bit looks at things like training opportunities, ethics, corruption or community engagement. Increasingly such ESG factors are integrated into investment analysis and decisions as they are seen to influence the level of returns and the control of risks. According the ESG Global Survey 2017, undertaken and published by BNP Paribas Securities Services, asset managers and asset owners plan to double their investment in ESG driven strategies over the next two years.
The report shows that of the 461 asset managers and owners surveyed, 79% already take account of ESG factors and plan to increase their activity in this area. While a positive trend, the survey highlighted the lack of robust data which could act as a drag on further adoption of ESG strategies in investment decision making. Linked to this, almost a quarter of respondents cited a lack of suitable analytical tools as a barrier to adoption. The survey makes the case for a smarter approach to data visibility and associated value, particularly in a world where more investment types such a hedge funds, infrastructure and private equity also take account of ESG ‘performance’.
Topolytics puts environmental data into context in order to generate meaning and value for companies and their stakeholders. Increasingly this data is being acquired from real time sensors, the so-called industrial Internet of Things (IoT) – for example, air and water quality or movements of waste. We integrate such data from different sources and apply analytics to provide insights that allow our customers to make better decision and increase efficiency. These insights are readily disclosed internally or to third parties such as investors. We are also concerned with data quality and are working with third party verifiers and research programmes such as the Science of Sensor Systems Software (4S) to provide a level of confidence in the data.
We place geography at the heart of what we do. For example, understanding the spatial relationships between sources and receptors of waste can drive better decisions and promote more efficient use of raw materials and enable more recycling and re-use. Geography is crucial context and lends itself to analysis, for example, understanding and predicting the generation and disposal of specific waste streams within a region or city.
To quote BNP Paribas, “Across the investment industry and around the world, there is clear recognition that ESG factors are of vital importance – to governments, regulators and institutional investors….Our report shows that there is expected to be a rapid rise in the number of ESG funds coming to market over the next two years. Yet despite the progress being made, barriers to even greater wholesale adoption remain.”
Topolytics’ marriage of data, analytics and context can help to overcome these barriers. We can enable investors to make sense of the ‘E’ in ESG in a cost effective way, while adding value to environmental and waste managers in industry.