Environmental, social and governance data can provide a wealth of information to help investors effectively manage risks and improve financial value for portfolio companies. But unlocking the opportunities that drive results begins with understanding the data. In an increasingly complex landscape, the ability to see the full picture of ESG performance in context has remained elusive.
PARTNER CONTENT
By Harry Mallinson
Head of Data Science, Novata
Environmental, social and governance (ESG) data can provide a wealth of information to help investors effectively manage risks and improve financial value for portfolio companies. But unlocking the opportunities that drive results begins with understanding the data. In an increasingly complex landscape, the ability to see the full picture of ESG performance in context has remained elusive.
One barrier to this has been the lack of benchmarks specifically for the private markets. While public company data is accessible, economies of scale, behavioral patterns, and regulatory pressures look very different in the private markets. Without the data to contextualise performance, it can be challenging to understand what “good” actually means — even if the numbers seem to suggest positive performance.
Novata Benchmarks, the private markets’ broadest collection of ESG benchmarks, is providing new context to help investors make the most of their data. Novata offers more than 250 benchmarks built on data from Novata contributors in the 2022 reporting period, de-identified and aggregated, and specific to the private markets.
Benchmarks are a powerful tool in a company’s financial and ESG toolbox that gives necessary context to understand and act on the data. The Novata Benchmarks provide investors with the visibility to make data-informed decisions and improve on the metrics that matter for financial performance.
Take, for instance, the increasing risk of, and regulation for, carbon emissions, which is driving expectations that businesses shift energy sources to a greater proportion of renewables over the next decade. Say an investor analyses the percentage of renewable energy of a potential investment company and discovers it falls in the bottom quartile compared to peers. This indicates a potential financial risk given that there is a cost to shift to renewable energy sources and decarbonisation efforts.
For investors that want to understand where to focus their energy and resources, benchmarks are a critical part of reaching that understanding. Companies behave differently depending on their size, industry, and other characteristics. By reviewing performance against comparable companies — i.e., companies that behave similarly to theirs — investors can get a more complete picture of performance across the portfolio. These insights reveal where companies may over- or under-perform relative to peers, enabling investors to set realistic, data-driven goals and move the needle on the metrics that matter.
Fundamentally, ESG is about managing risks, which increases a company’s resilience in a constantly evolving market. As investor focus continues to shift to leveraging ESG data to improve value, the ability to answer the question, “How are others like me doing? And how do I compare?” will be critical. With Novata Benchmarks, investors can begin to answer these questions and set new standards for performance on the metrics that matter. Learn more about Novata Benchmarks.
Harry Mallinson, head of data science, Novata – Harry Mallinson is the Head of Data Science at Novata. Prior to joining Novata, he worked in machine learning and data science in the EdTech sector for several years. Harry is a graduate of Oxford University.
