Sustainability today has become a strategic and operational imperative for organizations. Investment, sustainability, and risk professionals are increasingly integrating environmental, social, and governance (ESG) components into investment decisions, analysis, and third-party risk management to meet regulatory requirements. Many investors are turning to ESG data providers to assist them with those efforts, resulting in significant growth and consolidation of this market. Solutions are becoming more mature and sophisticated. However, key challenges remain.
The ESG landscape is witnessing a seismic shift, marking a significant year in the global pursuit of sustainability and responsible business practices. With governments, investors, and companies reporting diligently on social equity, climate action, and transparent governance, the momentum for ESG data integration has reached new levels.
Key regulatory advancements, along with innovative green technologies and growing consumer demand for ethical business practices, are creating an environment where ESG considerations will be essential for business success.
Read more: Top 10 Most Sustainable Companies for 2025
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Real-Time Sustainability Reporting
Artificial intelligence (AI) and automation are transforming the way organizations collect, analyze, and report ESG data. Sustainability reporting is shifting towards real-time updates. Organizations must provide ongoing updates on key ESG metrics.
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Better Data Quality and Assurance
The growing demand for independent third-party data audits for sustainability reports is on the rise. This is already mandatory in Europe under the Corporate Sustainability Reporting Directive (CSRD). Organizations invest in robust frameworks to track, manage, and verify their ESG data, ensuring their ESG reports are accurate and reliable.
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Increased Focus on Biodiversity in ESG Ratings
With environmental concerns on the rise, ESG ratings are set to evolve, including those for biodiversity and natural capital. Investors and stakeholders are becoming more aware that their organization's environmental impact goes beyond carbon emissions, including deforestation and biodiversity loss.
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ESG as a Core Value
Many companies are tying executive pay to ESG performance. This will help ensure that leadership aligns with long-term sustainability goals, making top management accountable for meeting the set ESG targets. Sustainability reporting is further shifting to reflect the core purpose and values of organizations, further demonstrating how sustainability is woven into different aspects of business operations.
Data Quality is Falling Short of Expectations
The ESG data market is expanding in scale, sophistication, and maturity. Increasing day-to-day ESG data usage by all financial institutions implies the market is far more significant than when it was reviewed two years ago. Rapid shifts are transforming ESG data markets, driven by growing demand from financial institutions.
Investor demand is a critical driver of growth in the ESG data market. Financial institutions with strong ESG propositions enjoy a competitive advantage over their peers. This factor is supported by a strong push from regulation, which continues to shape ESG data markets.
The scope of ESG data coverage is growing as investors are looking beyond climate to address environmental issues and social priorities. Biodiversity is one example of a budding data category receiving growing attention from providers. Despite the availability of ESG data, ever-growing user expectations imply there are gaps to be filled. Scope 3 emissions data is one such area where the limitations of underlying ESG disclosure leave data providers to rely on interpretation and proxy metrics.
The relative novelty of ESG data indicates that operations and governance can be weak. A lack of technology, data professionals, or oversight can lead to an overreliance on manual processing, an absence of data validation, data silos, and a loss of version control.
Today, ESG data is increasingly used alongside conventional financial disclosures in investment decision-making. In response, the integration of strategic data management is growing. Organizations have a clear scope for cutting costs and increasing benefits by integrating ESG data into enterprise-wide data management strategies.
Read more: The Power of Data Analytics in Sustainability Initiatives
ESG data markets are more dynamic than ever. Data categories are advancing rapidly, but many gaps, questions, and inconsistencies still need to be addressed.
Adoption of ESG Data Management Tools
Financial institutions increasingly leverage advanced ESG data and analytics to enhance investment decision-making, risk management, and compliance strategies. Technological innovation, regulatory shifts, and a growing focus on standardization and transparency characterize the evolving landscape.
78% of institutions incorporate ESG data management software to streamline data processing, reporting, and analytics.
Evolving Regulatory Landscape and Policy Shifts
New ESG disclosure requirements are being implemented worldwide, increasing compliance expectations for financial institutions. As a result, 68% of firms are adapting to climate risk disclosure mandates, while 66% are compliant with mandatory ESG reporting standards.
Many firms are now required to adopt standardized ESG reporting frameworks, reflecting a shift toward greater corporate accountability and transparency. This includes a stronger focus on diversity and inclusion reporting (48%) and government-led incentives or tax benefits for ESG investments (40%).
Innovations in ESG Reporting and Data Analytics
Financial institutions are adopting API-driven ESG data platforms to streamline data integration, while others rely on traditional data management tools. Machine learning and alternative data sources, such as satellite imagery and real-time emissions tracking, are improving ESG risk assessment accuracy.
A Market Growing in Sophistication
The usage of ESG data has seen exponential growth over the past few years. Vendors in the ESG data and analytics landscape are following different approaches to innovation and taking steps to drive growth, ranging from private equity investments to strategic acquisitions. With new ESG regulations and standards raising the bar for disclosures and investors requiring reliable climate data to deliver and credibly report on their net-zero commitments, the ESG data market is also expanding regarding data types and breadth of data.
The creation and collection of these data points are growing every second, and society’s understanding and emphasis on ESG concerns are skyrocketing with the increase in social media platforms that offer instant access to information. These shortcomings will take time, and vendors cannot solve every problem.
Read more: The ESG Data Dilemma: Challenges in ESG Data Accessibility and Quality
Innovation from industry leaders will continue to drive progress. Even so, many users of ESG data can rely on different data providers for the foreseeable future. The good news is that users can take action to trim costs, reduce risks, and maximize the value they derive from ESG data. The following focus areas will be imperative to any ESG data strategy:
- Migrating to a single data later to support will help strip out the cost of duplication while also lowering the data risk around inconsistency.
- Integrating a data model that merges key ESG frameworks into a single data model to visualize the data lineage. This will help identify overlaps between frameworks and support rationalizing external data sources.
Embedding the ESG governance operating model can be leveraged to further streamline the data governance actions required and to offer a holistic view of priority data management initiatives.
Long-term Outlook: The Future of ESG Data
The next phase of ESG data evolution will focus on proactive risk assessment, integrating climate transition modeling, biodiversity impact analysis, and supply chain due diligence. With financial institutions continuing to refine their ESG data strategies, the industry is moving toward a more structured, technology-driven, and standardized ESG ecosystem.
The ESG Data Insights Report 2025 offers findings from SG Analytics’ survey of financial institutions, examining the role of ESG data in investment decision-making. The survey further presents critical insights from financial institutions across different geographies, assessing their ESG adoption strategies, challenges, and future outlook.
Key Highlights
- The ESG data market is transitioning to meet the growing demand from financial institutions and their investors and regulatory requirements.
- Large vendors dominate the ESG data markets. However, more specialized data providers are addressing the niche gaps that financial institutions require.
- Significant challenges exist in the quality of data available, and there are likely multiple data providers that will be required in the foreseeable future.
Read more: Decarbonizing Industries: Breakthrough Technologies for Net-Zero
Final Thought
The future of ESG data utilization is anticipated to be driven by technology, regulatory alignment, and demands for transparency. Financial institutions, positioned between traditional finance and ESG integration, play a pivotal role in shaping sustainable investment practices. By embedding ESG into risk models and capital strategies, they influence market trends and corporate sustainability efforts. Institutions that seamlessly integrate ESG data will be better equipped to navigate risks, seize opportunities, and drive long-term financial resilience.
A leader in ESG Services, SG Analytics offers bespoke sustainability consulting services and research support for informed decision-making. Contact us today if you are searching for an efficient ESG (Environmental, Social, and Governance) integration and management solution provider to boost your sustainable performance.
About SG Analytics
SG Analytics (SGA) is an industry-leading global data solutions firm providing data-centric research and contextual analytics services to its clients, including Fortune 500 companies, across BFSI, Technology, Media & Entertainment, and Healthcare sectors. Established in 2007, SG Analytics is a Great Place to Work® (GPTW) certified company with a team of over 1200 employees and a presence across the U.S.A., the UK, Switzerland, Poland, and India.
Apart from being recognized by reputed firms such as Gartner, Everest Group, and ISG, SGA has been featured in the elite Deloitte Technology Fast 50 India 2023 and APAC 2024 High Growth Companies by the Financial Times & Statista.
