Incorporation of sustainability – particularly Environmental (E), Social (S), and Governance (G) criteria - in investment decisions is a major emerging trend in investing and asset management. Increasingly, our society is witnessing an acceleration in viewing ESG alignment not only as a risk mitigation strategy, but as a generator of investment alpha.
To derive competitive advantage from the positive ESG alignment of assets, it is no longer enough to only use exclusionary principles while making investments. Indeed, fund managers and investors must be able to benchmark and compare between the expected performance of different assets before making investments. The comparison must be based on the predicted material impact of the assets, much like predicted cash flow statements or income statements, and not on some confusing number based on a secret formula from a third-party agency. For example, how does the expected reportable carbon emissions, waste generation, water usage of Investment A in the investment period compare with that of Investment B?
In a business environment where reliable ESG reporting is still scarce and greenwashing is a significant risk, major data deficiencies are contributing to the challenges of discerning investments based on ESG. One too many times, we have seen fund managers and investors getting blindsided while making an investment, only to find out about its deficiencies when it’s too late – leading to costly mitigation and reduced returns.
At ESG Base, we are on a mission to tackle these data challenges. We are developing a highly advanced technology solution that can bypass these data deficiencies and separate the wheat from the chaff for real asset investors. Our solution is not only grounded in the state-of-the-art information technology, but brings together the fundamentals of chemistry, mechanical and environmental engineering, financial analysis, and knowledge of regulatory compliance, all in a single integrated and automated platform. Because of our fundamentals-based approach, the ESG Base technology can cut through the fog where reliable ESG reports of comparable operating assets are not available.
The ESG Base team is proud to be supported by the Institute of Innovation and Entrepreneurship at London Business School. In the coming months, we will be looking for strategic partners for at-scale deployment and piloting of our technology solution. We invite you to join us in this exciting journey to accelerate your goals of ESG investing.