Data & Technology
"It's not easy bein' green" — Kermit (Frog)
Analytical primacy and technological agility are differentiators
As a famous frog once lamented, it’s not easy bein’ green — clearly alluding to the pains of integrating ESG data into the investing process. I make it easier for clients to attain their desired shade of green.
My “special sauce” (venture capital speak for “unique value”) is a blend of deep subject knowledge and technical proficiency. Investing, finance, and ESG expertise powered by data science, technology, and a “hacker mindset”.
By “hacker” I mean someone using technology to solve problems (original definition) versus a teenager in a dark basement subverting computer security in the spirit of anarchy, or just out of boredom. By “mindset” I mean a way of problem-solving more Sherlock Holmes than WarGames, curiosity and ingenuity as a way of life, a mentality where “impossible” is an invitation to prove someone wrong.
Specifics range from ESG research and data discovery, to data visualization and writing, and even “mundane” tasks like data cleansing. That said, the gist of how I apply subject expertise and data science falls into two categories:
- Innovative ESG Research: Uncovering original and contextually-relevant (i.e., specific to a client’s use case and views on materiality) ESG insights for clients through innovative data-centric research and analysis, informed by experience.
- Sector-Specific Guidance: Levering my energy and utilities expertise (including related environmental issues) by helping investors analyze specific companies and/or understanding the sectors’ impacts on other portfolio holdings.
Below are examples of how I tackle common ESG data problems, mine original data from atypical sources, and most importantly extract actionable insights via analysis. I also leverage my general grasp of technology to advise on emergent ESG topics like cybersecurity (see my blog post Cybersecurity & ESG Investing for an example).
Problem: Readily-available ESG data represents a fraction of what exists and is, well, readily available; of limited competitive value.
Solution: I help gain a data advantage by uncovering "hidden" data with custom web crawlers, penetration testing tools, etc.
Problem: ESG data is backward-looking and infrequently updated but capital markets are forward-looking and update frequently.
Solution: I monitor real-time alternative data streams (news, social media, satellite imagery, etc.) for ESG trends and critical events.
Bespoke ESG Analyses
Problem: ESG data and products make broad assumptions about metrics and materiality but those are subjective/context-specific.
Solution: I do bespoke analyses like using NLP to gauge portfolio companies' adherence to SASB or GRI reporting guidelines.
Data Due Diligence
Problem: ESG disclosure isn't regulated, audited, or standardized and what exists is self-reported and biased toward the rosy.
Solution: I find objective data, perform deductive "sanity checks," extract and normalize data from sustainability report PDFs, etc.
The energy and utilities sectors are still a key part of what I do, even though I’m involved in many other aspects of ESG these days. They are highly relevant to all SRI/ESG investing — regardless of sentiment or direct ownership.
Aside from being key to portfolio construction and comprising “good stuff” like clean energy, the sectors’ impacts are consequential and far-reaching (see the intro in Utility Cybersecurity Disclosures). For example, they:
- Are vital links in every supply chain and critical to the sustainability of other sectors, industries, and companies
- Contribute to national, state, and local economic health, community development, and government functioning
- Play outsized roles on every conceivable environmental issue, from greenhouse gas emissions to water quality
- Figure heavily in the success of major sustainable development frameworks and goals such as the UNDP’s SDGs
I’m not trying to solve the world’s ESG data problems, nor am I throwing rocks at goliaths like Bloomberg. My niche is highly-focused “long-tail” ESG data research well outside the strategic scope of big-box ESG product vendors.
I’m a complement not a replacement.