Four Things No One Will Tell You About ESG Data

The demand for information that captures how companies use different forms of capital-natural, social, human, and intellectual, as well as financial-to provide their products and services, and how their activities affect society through positive and negative externalities, has led to the creation of environmental, social, and governance (ESG) metrics and related corporate reporting efforts. These efforts have resulted in a proliferation of ESG reports, associated ESG data and ratings, and organizations trying to develop a more rigorous and systematic reporting of ESG information. As the ESG finance field and the number of people using ESG data in investment decisions continue to grow, it is important to shed light on and express our concerns about several important aspects of ESG measurement and data. This is not meant to be a criticism of any efforts in the field to measure, analyze, and communicate ESG activities and outcomes. It is intended rather to provide a useful guide for the rapidly rising number of people entering the field.