The market for ESG data passed $1bn in 2021 and could exceed $1.3bn this year, according to a report from US-based management consultancy Opimas.
The firm believes the ESG market has grown at an average annual growth rate of 28% over the past five years, driven by demand for ESG investment strategies and regulatory requirements around ESG reporting and disclosure.
Opimas relied on publicly available information, interviews, and companies’ actual or estimated revenues for its projections.
Around 70% of the total ESG data market comprises research and analytics, which includes ESG ratings, raw data and other dedicated solutions, the company said. The other 30% relates to ESG indices, but Opimas noted that this segment is growing even faster than the wider market. Driven by demand for exchange-traded funds and a growing number of indices worldwide, the data market for ESG indices has grown at an average of 38% over the past five years.
Opimas expects that more stringent requirements around climate stress tests and ESG disclosures will ensure a ‘healthy pace’ of growth going forward. The firm pointed to the EU Action Plan on Sustainable Finance, recent proposals from the US Securities and Exchange Commission (SEC) on climate disclosure for public companies, and initiatives like the Task Force on Climate-related Financial Disclosure (TCFD).
The emergence of new requirements and standards has prompted ESG data vendors to offer new products, it said.
"This is particularly true regarding climate-risk solutions and EU reporting tools and services," said Opimas. "Beyond traditional ESG data products like ESG ratings, most ESG data vendors now offer a gamut of sophisticated products focusing on carbon footprint calculations, climate scenario analysis and the financial impact of climate change."
Although a steady stream of mergers and acquisitions has left a small number of firms with the bulk of the market – MSCI, ISS ESG and Sustainalytics have a combined market share of 60% – the report concludes that the ESG data services space "remains relatively crowded, with many boutique firms and upstarts" and that the growth in regulatory requirements and product offerings means there is still ample room for new ESG data providers.