How Investors are Making Money from Climate and Sustainability Data, Leaving Politics Behind
Politics dominates the air waves, but how much change will there actually be in climate reporting going forward? Should a U.S. company just delay their data collection and report preparation efforts? Is “wait and see” a good strategy?
GLYNT.AI went to the financial markets to answer the question. Reviewing academic research, investor reports, analyst commentary and news, our work shows that indeed investors are making money from company-reported sustainability data.
And they are using that data in investment strategies that cut across the financial markets, not just in specialized segments, such as impact investing.
Consequently, GLYNT.AI found no value in delay. Investors are acting with pure profit-seeking motives, as they face significant, quantifiable cost to their investments from climate change. The high and broad based costs of climate change dwarf any political consideration.
The data also shows that investors are putting together a single company risk/reward profile that includes data from three sources: climate data; company-reported sustainability data; and financial data. For example, investors are now paying for additional data services from Bloomberg and Moody’s to bring this data all together. They expect to make money from this extra data.
And the evidence from academic studies and investor performance supports this conclusion. It shows that company-reported sustainability data drives up the financial return beyond what can be explained by other factors. Further, the data shows that asset values reflect investor forecasts of long-term climate change.
The financial markets are rapidly processing data on the cost of climate change and using sophisticated strategies to make money from the data. We are no longer in the world of stock selections that “make money AND save the planet.”
We’re in the world of slicing and dicing risk, where normal everyday risk includes the cost of climate change. Investors will seek out profit opportunities where climate risk has been ignored or mispriced. Their actions will continue to drive the cost of climate change into asset values. Politics doesn’t matter – accurate, audited sustainability data to drive investor returns does.
For reporting companies, the evidence is clear:
- Don’t Fly Blind. If you don’t prepare and review your sustainability data, you don’t see what investors see.
- Don’t Leave Money on the Table. Company value now depends on the specific exposure to climate change, as investors are triangulating climate risk data by location, the location of your assets, the level of your carbon emissions and more. Access to capital at fair terms depends on knowing your sustainability data story.
- Don’t Be the Bag of Carbon. Investors don’t want to hold assets with high carbon emissions over the long term, as these have the highest risk of significant value loss. Use your sustainability data to create a credible emissions reduction plan, and execute on it. Report it to shape the investor story.
- Be First Amongst Peers. The cost of climate change is not confined to a specific segment or market niche, nor are investors. Be the risk/reward leader in your sector or sub-sector – including consideration of climate change. You’ll have a larger set of investors.
- Tell One Story. If your sustainability data and carbon emission reduction plans contradict your financial data, or if your long-term strategy just doesn’t line up with your available cash, investors will see it as extra risk. Don’t add risk with poorly prepared sustainability data.
- Build Your Own Terminal. To maximize corporate value with data-driven AI-powered investors, you need to see what they see. Build your own terminal or set of dashboards. Use it to evaluate your climate risk profile and put in mitigating strategies. Get arms for the arms race.
In sum, companies need investors, and investors want accurate, actual, audited sustainability data from companies. They are making money from this unique data. Companies that don’t prepare, report and act on sustainability data will erode in value. Politics and delay provides no advantage in a financial market that is already actively pricing the cost of climate change in every asset class.
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ABOUT GLYNT
GLYNT is The Sustainability Data Company, producing investor-grade data for businesses around the world. Our audit-ready sustainability data enables accurate reporting, operational efficiencies and access to financial capital. With a purpose-built machine learning system, GLYNT is the automated solution for all types of water, waste, energy and emissions data. Speed work, lower costs, and power ESG, carbon accounting and other business systems with accurate, actual data from GLYNT. Learn more at glynt.ai
