ESG Book equips investors with AI-powered sustainability insights

Unlike other resilient nations, the US is only now beginning to organize the pieces of the puzzle needed to structure and standardize the sustainability reporting requirements needed to meet newly proposed US Securities and Exchange Commission (SEC) regulations .

“When I think about this topic, it reminds me of walking down a grocery store aisle and seeing a product like non-fat milk,” SEC Chairman Gary Gensler said in a statement. “What does ‘fat-free’ mean ? Well, in this case you can see objective numbers like grams of fat listed on the nutritional label… However, when it comes to ESG investing, there is currently a wide range of what asset managers might be disclosing or implying with their claims.”

In March, the SEC presented detailed proposed rules that would require companies — both foreign and domestic that are registered with the SEC — to report information on climate impacts and emissions. Amendments were added to the proposal late last month “to encourage consistent, comparable and reliable information for investors on how funds and advisors are considering environmental, social and governance (ESG) factors”.

These specific reporting requirements have historically been largely optional in the US, but there is increasing pressure on companies and investors to understand, communicate and act on sustainability data.

However, some companies are not waiting for an official policy to clarify the details. ESG Book, a company founded in 2018, has built a cloud-based platform powered by AI-powered analytics and serves its client base of financial institutions – such as Bridgewater, JP Morgan, Citi and Robinhood – with sustainability and ESG data of more than 25,000 people supplied companies.

“I think we all recognize that there are a number of major pressures all around us that the world needs to respond to – climate change is probably the most pressing… and financial markets are usually one of the most powerful ways to address and mobilize change.” Daniel Klier, CEO of ESG Book, told VentureBeat. “That’s why business as usual is no longer an option.”

If business can’t go ‘business as usual’, change it

ESG Book is fresh from a newly announced $35 million Series B round led by Energy Impact Partners along with Meridiam and Allianz X.

With the funding, the company aims to scale its platform while ensuring its technology continues to provide its financial institution clients with ESG data that is “accessible, consistent and transparent, enabling financial markets to allocate capital to more sustainable and impactful assets.” according to the company’s press release.

Although there are several tools on the market that companies can use to measure their sustainability performance, ESG Books hopes to bridge the gap between the ESG data that companies collect and publish in various places such as press releases, online, annual reports, etc to share in an accessible way for investors to arm them with what was historically disjointed and difficult to piece together.

“You see the SEC and the Federal Reserve incorporating climate risk into their practices, but are you really seeing any fundamental shifts in how investment patterns work right now?” asked Klier. “We think many other companies are helping individual firms with their carbon calculations, but then communicating with stakeholders – one of which is the financial services market – isn’t working right now. That is the problem we are trying to solve.”

What’s under the hood to bridge the gap

ESG Book’s platform collects 450 data points about companies that they either report on themselves while using AI to analyze 30,000 news sources on what the world is reporting about that company.

ESG Book conducts analysis in two ways. A fund manager or investor can have the data fed into their own systems via an API, or upload entire investment portfolios to ESG Book’s platform via a .csv file and ESG Book will perform all analysis on their platform.

“We collect the data using a combination of human analysts and artificial intelligence,” said Klier. “Then we invite each company to verify the data on the platform. So companies can see what we have on them and I think [this is] quite a powerful way to create a dataset, but also to give companies control over what type of data we have.”

The company’s algorithm and public company information record allows investors to log in and enter the name of a public company, such as Alphabet Inc., for example. From there, it displays a UN Global Compact score, which is an assessment of anti-corruption risk, environmental risk, human rights risk, labor risk, and so on.

Investors can examine the underlying raw data that ESG Book has collected about a company to better understand things like a company’s Scope 1, 2 and 3 emissions.

It can also show the distribution of a portfolio or company’s performance, allowing investors and fund managers to compare the data to see how that performance compares to industry or competitor averages.

“ESG Book is a platform with the potential to transform the way ESG data is processed by the financial world. We believe it will significantly improve the quality and availability of ESG information to steer funding flows in line with the Sustainable Development Goals and the Paris Agreement,” said Thierry Deau, Founder and CEO of Meridiam, a lead investor the Series B round. Sustainability must not remain a buzzword in the C-Suite.

As Klier notes, sustainability is still a buzzword for many CFOs. And while ESG Book’s platform will provide investors with real-time, granular sustainability data, it is also useful for CFOs to help them understand how to communicate ESG data and drive lasting improvements for their businesses.

“I think it’s a critical moment for sustainability. Because from my point of view, we’ve talked about it a lot in the last five years and made it a big topic,” said Klier. “Now the expectations of everyone involved are huge. I think it is a critical time to redirect investment and flows.”

As for the next steps for ESG Books, Klier says the Series B injection will allow the company to prioritize its next focus: working with investors to create more transparency in private markets.

The growth of ESG Book is part of the larger market for ESG data and services, which is expected to grow to $5 billion by 2025.