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The Truth Behind ESG Data: Top 3 Roadblocks To Quality ESG Data

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The Truth Behind ESG Data: Top 3 Roadblocks To Quality ESG Data

First Rate Team • August 10, 2022

We sat down with OWL ESG founder Ben Webster to uncover the layers of ESG data.

Many people in the industry continue to be at odds about what criteria will qualify a sustainable company and which data can disqualify them. However, at its core, ESG is DATA. It’s data on how a company affects its environment, how it interacts with society, and how it is governed. Here are the top three roadblocks to Quality ESG data that we discussed during this episode.

Lack of Regulation and Standardization

While the SEC is working to create specific ESG requirements that include actual metrics, there is still a lack of standardization and data comparison. There are no third-party auditing requirements at this time, and until there are, discrepancies and data manipulation will be rampant.

Political Bias

The political divide is high when it comes to interpreting ESG data. For example, many progressives and conservatives disagree on what diversity and inclusion look like and how companies should regulate it. The same goes for climate impact – especially when there is no regulatory standardization. ESG data is seldom black and white. There is a lot of gray area in the data and without context, many people are disqualifying companies on a surface level that are actually qualified when the data is examined more thoroughly.

Greenwashed Data

Even if we were to solve many of the other issues around analyzing and qualifying ESG companies, there is still the question of “is the underlying data accurate?” The demand is growing to obtain access to the underlying or raw data. Greenwashing, which is providing misleading information on how a company is environmentally sound, exists only because there is no well-developed system to uncover data discrepancies. Many companies are using marketing and advertising to cover up bad or incomplete ESG data. The SEC is pushing to have certain ESG criteria mandatory, but until then, there are many gaps that mislead stakeholders.

Listen to the full Ventures in Wealthtech episode to learn how to better understand ESG data and how it relates and contributes to long-term sustainability.