With data gaps becoming particularly evident in factors linked to Diversity and Inclusion, a new analytics platform has been launched that offers real-time, data-driven and transparent scoring of environmental, social and governance (ESG) factors for investment portfolios and stocks worldwide.
Strong on the S and G pillars, the GaiaLens platform sources and scores unstructured, independent third party data, as well as more traditional self-reported data, across all key ESG factors. The platform has been designed to help asset owners, asset managers and pension trustees fill ESG data gaps and test the self-certified ESG claims of publicly-listed businesses.
Evidence for benefits of gender and ethnic diversity
Research by GaiaLens found that less than 10% of public companies currently provide key Social and Governance data needed for ESG disclosure, including statistics on gender and ethnic diversity representation on their boards of directors.
This data deficiency persists despite the growing evidence on both sides of the Atlantic that companies with larger gender and ethnic diversity at senior level within organisations, on average have higher share price performance, better risk management and endure less fraud.
Currently within the S&P 500, women only hold a third of board seats and six per cent of companies are run by women. This status quo is set to change rapidly across industries now that the SEC has approved a rule from Nasdaq that all newly-listing companies must have at least two diverse board directors or explain why they do not.
Some US states have already passed legislation that requires certain levels of board diversity. For example, in California on 30th September this year, new regulation AB979 was enacted mandating that the boards of larger firms, if headquartered in the State, must have two or three minority directors on their boards by the end of 2022.
Searching and scoring under Social pillar
At launch, GaiaLens has deep ESG-relevant data for approximately 16,000 public companies. All data is compiled, measured for consistency and transparency and scored in real-time equally across the E, S and G pillars. Its data sources and analysis are equally detailed across all three pillars.
In its Social ‘pillar’ alone, GaiaLens runs extensive data searches against three core Themes and 45 Features. Once all available structured and unstructured data is gathered, it is scored via its own proprietary algorithm. At each point of aggregation, GaiaLens can show the user where the numbers come from and allow them to drill down or drill up through its analytics system.
However, GaiaLens has spotted that as regulation has tightened up in specific areas like Diversity and Inclusion reporting, more and more asset owners are complaining that they are struggling to gain access to reliable Social and Governance data to enable them to meet these new reporting requirements.
The ESG platform provider also noted in Europe and the UK markets, rapid adoption of EU Taxonomy is simultaneously putting a great many asset managers and asset owners under strain as they struggle to get access to data of sufficient quality and depth to meet impending demand.
Although the EU Taxonomy directives do not have to be written into national law until the end of 2022, many asset owners and managers are already asking public companies to begin providing data in line with the reporting requirements.
The writing is on the wall, says Gordon Tveito-Duncan, co-founder and head of ESG Technology at GaiaLens:
“As we get closer to EU Taxonomy deadline for reporting there will be a growing realisation that asset owners, asset managers and pension trustees do not have all the information they need to accurately assess firms’ ESG performance. As well as asking these firms to supply key ESG data, they may also want to strengthen their scrutiny by accessing verifiable third-party data.”
The new platform collects and aggregates data from a substantial number of NGOs as well as from popular employee review websites, court records and more. As such, it therefore focuses on finding and placing a uniform value on data coming in from multiple trusted sources.
Ultimately, you cannot manage what you cannot measure, concludes Gordon Tveito-Duncan:
“There are two key elements in enabling ESG performance measurement: being able to access the fullest possible amount of data in real-time and using the latest technology to analyse and score that data in a highly reliable, consistent and systematic way. That’s what GaiaLens does to help make ESG performance measurement easier for investors.”
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