How Data Visualization Can Improve ESG Investment Decision-Making

man pointing finger at ESG financial data streaming with globe behind

Socially responsible investment strategies have become a high priority due to growing climate crisis concerns. With sustainability awareness gaining prominence at a global level, companies and personal investors are increasingly more cognizant of potential environmental issues.

In fact, ESG investing has grown at an exponential rate in recent years. According to The Wall Street Journal, in 2019 ESG investing grew 42% in a two-year time period. Additionally, by the end of 2020, the number of U.S. open-ended funds and ETFs with defined sustainability objectives increased by 30% from the prior year. Not to mention, ESG investing is expected to surpass $1 trillion by 2030. 

As a result, financial institutions are considering ESG, or environmental, social and governance investing, a top priority for their companies. By closely analyzing data, organizations can understand the widespread impact of various environmental and social factors to maximize fiduciary returns.

In this article, we’ll take a closer look at how ESG investment has become a key factor in economic global sustainment and how data visualization can help organizations make informed decisions.


What is ESG investing?

ESG, or environmental, social and governance investing involves using specific criteria to analyze how a company’s decisions impact the environment. The main goal of ESG is to maintain profitability while still adhering to conservation and environmental goals. By reviewing a company’s sustainability impact, organizations can minimize risk while improving public perception.

Some of the criteria ESG looks at includes:

  • Environmental: carbon emissions, pollution, waste management and conservation techniques
  • Social: diversity standards, data usage, fair labor laws and sexual harassment management
  • Governance: minimization of corruption, lobbying, regulation of pay

Data visualization can be an organizational tool used for strategic analysis and a reduction of operational risk. You never want to make decisions based on incomplete data—data visualization provides the full picture to make informed decisions.


Assessing ESG Portfolio Risks

Using real-time data to assess ESG risks can assist organizations with determining portfolio risk and cash flow. It can help organizations gain an operational perspective of assets, bills, payments and various investment strategies. Analyzing data from each of these sources can help fill in potential gaps when it comes to assessing overall ESG risk management. 

As investor demands for climate and sustainability increase, the SEC has responded with new guidance and standards to help increase socially-conscious investment strategies. Their proposed Annual Regulatory Agenda recommended enhancing the rules requiring disclosures of Environmental, Social and Governance related activities. 

Organizations should look to various industry sectors to determine the impacts of weather, social unrest and management issues. Maintaining ESG reporting standards can help businesses demonstrate adequate sustainability performance while tracking long-term progress. This can help minimize organizational reliance on self-reporting from companies, which may not always be accurate, timely or trustworthy.


Identify Investing Opportunities

Using real-time data can provide companies with increased visibility into potential investment opportunities. For example, consider a potential retail store purchase. In order to gain a better understanding of the profitability of a company, you must take a closer look into the historic and real-time data associated with that particular location. 

Organizations can utilize rollback scenarios to better understand ESG risks. These rollbacks can help determine the root cause of ESG risk changes. Furthermore, organizations can be notified of impending environmental risks that may impact asset volatility. This data can be used to formulate real-time analytics to help adequately disclose ESG requirements. 

Data visualization tools can also be used to assess a company’s strengths and flaws at a social level. Organizations can steer clear of brands that are currently experiencing social unrest issues. After reviewing each of these factors, organizations can determine if long-term investment opportunities are worthwhile or if they’re too risky.


What are People Saying About Data Visualization?

Managing large data sets can be a hassle when it comes to performing real-world analysis. Using automatic data visualization tools can provide organizations with valuable insights into potential ESG investment opportunities. By aggregating data from various sources into an intuitive, easy-to-use platform, companies can gain valuable insights for making critical decisions with real-world impacts.

Failure to recognize potential ESG concerns can result in devastating financial implications for companies. One recent example dealt with rare earths mining company Lynas Corp. In 2019, Lynas received backlash from Malaysian environmental groups due to massive radioactive waste problems. The outrage nearly resulted in a full-fledged shutdown, which could have caused a massive reduction in global investment. If Lynas had the foresight and a robust ESG data visualization solution, they may have been able to avert such a potential catastrophe.

The bottom line is data analytics can be a valuable tool for organizations for improving decision making. Using data visualization can simplify data analysis by incorporating charts, graphs and tables to simplify and aggregate raw data, thus providing a complete picture for more actionable insights


Learn More 

If you would like to learn more about data visualization and real-time analytics for your enterprise, check out how Live Earth’s platform helps financial institutions. Our valuable insights make data visible and usable by aggregating and visualizing metadata into a single easy-to-use platform.
Ready to see it in action? Be sure to schedule a free demo with us today!

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