As the usefulness of ESG analytics is increasingly being focused upon across a vast array of financial markets, it’s useful to be aware how ESG performance data correlates with and influences international credit ratings. By way of introduction, the chart below compares the ESG performance of a range of countries with their sovereign credit ratings.

ESG investment data has evolved dramatically in recent years, and is arguably worthy of greater investor attention as its usefulness continues to escalate. With the market’s growing appetite for effective investment tools, more and more professional investors are using high quality ESG data as part of their investment process to better mitigate against corporate risk and to potentially increase their alpha.

The use of alternative ESG data by the institutional investment world is gathering momentum. Factset estimate that some 70% of global investment companies are in the early exploratory stages of understanding how to best utilize the growing opportunity set in alternative ESG data. Most of these professional investors are exploring the value of ESG and sentiment analysis information due to their growing awareness of the value this data can deliver their clients.

Against an ever changing landscape, alternative data takes on new importance in identifying emerging, economic and market trends that traditionally can be slow or impossible to efficiently contextualize.