Accurate ESG reporting is key for investors to stay compliant with regulations. However, analysts are spending an increasing length of time generating these reports — up to 20 hours per portfolio — due to the sheer volume of data they need to sift through. This is time that could be better spent carrying out ESG research or engaging with companies.
An EY report found that 55% of analysts house ESG data in spreadsheets, using them to manually generate reports. This process can sometimes take days, depending on how much data they need to analyse to generate the necessary reports.
In this article, we’ll look at how investors and asset managers can automate ESG data reporting processes, saving both time and resources.
The Challenge of Manual ESG Reporting
For asset managers, one of the biggest challenges of manual ESG reporting is "ESG fatigue" from the high volume of data requests, as they often find themselves overwhelmed by the sheer quantity of data needed to meet compliance standards.
Meanwhile, asset managers also face "platform fatigue" due to the crowded ESG data market, where dozens of platforms promise solutions but fail to deliver on those promises.
Underpinning this fatigue is the ongoing challenge of dealing with ESG data which is inconsistent, unstandardised and has a lot of gaps.
In a worst-case scenario, noncompliant or untransparent ESG reporting can result in hefty fines from regulatory bodies, such as the Australian Securities and Investments Commission (ASIC), which, in September 2024, slapped Vanguard with a record USD $8.9 million fine for misleading ESG claims.
To avoid facing such fines, the reporting process should be standardised and transparent. However, this can be difficult when traditional, manual ways of generating reports require looking at a large amount of data from multiple sources.
Some of the biggest challenges that go hand-in-hand with manual ESG reporting are:
Time: Analysts are having to manually pull data from multiple sources, which takes time. They’re also having to stay on top of any controversies in the news that can have serious negative effects on a company’s standing.
Unstructured data: Pulling data from such a wide range of sources means it’s often unstructured and not uniform, making it difficult to manually match and compare statistics and ensure compliance with regulations. Analysts can, and often do, spend hours organising the information in order to properly and precisely extract relevant insights.
We spoke with Solène Eveillard, ESG & Impact Analyst at Nordea Asset Management, who said: “The biggest challenges for impact indicators are the absence of standardised frameworks and limited data availability. There is a need for comparability and uniform data sets, but also for unique, company-specific analysis.”
User error and fatigue: Analysts look at company data across various spreadsheets, databases, and data sources to gain a holistic understanding of its ESG standing.
Eveillard told us: “The team spends a lot of time analysing company reports directly, as this allows them to get data in context, rather than relying solely on ESG data providers.”
However, searching through mass amounts of company whitepapers, reports, and spreadsheets can result in user fatigue and error. As the process of searching through data is manual and time consuming, analysts sometimes read and input data incorrectly, which can impact the ESG report generated and put the company at risk of noncompliance.
Regulatory burden: ESG reporting is a mandatory practice in select countries, including:
United Kingdom
Switzerland
Hong Kong
All countries in the EU
Within these countries, the regulatory landscape is constantly evolving due to governmental changes and updates. Asset managers and investors must keep on top of these changing regulations, to stay compliant and avoid having to pay potentially costly fines.
Benefits of Automating ESG Reporting
Speed up data collection
By leaning on AI and automation, analysts can access cleaned and processed ESG data including previously unstructured data such as social media mentions and news reports. This saves them time from manually aggregating and manipulating the ESG data from disparate sources themselves on Excel.
Reading through the data is one of the most time-consuming aspects of ESG research. In an interview with GaiaLens, ESG Analyst at Ecofi, Alix Roy, said: “[The team] spend a lot of time going through public company documentation (annual reports, sustainability reports, CDP etc). Fifty percent of the time is spent on:
Analysing profiles of companies
Controversies
Qualitative analysis — Greenfin Fund
Forty percent of time is spent on engagement and 10% on regulation.”
By speeding up this process, analysts free up time and resources and generate ESG reports faster.
Discover how the GaiaLens PDF chatbot can save hours of sifting through annual company reports.
Real-time monitoring
Automating data collection provides access to the most up-to-date information for real-time monitoring. Utilising AI allows analysts more time to keep track of the latest regulations, which helps them generate more accurate ESG reports.
This can help to ease the regulatory burden they experience, as they’re able to spend the time researching rather than reporting.
Reduced risk, increased accuracy
We previously mentioned that user fatigue and error can occur when analysts are spending more time searching through data to generate reports. By leaning on AI to process qualitative and quantitative data, you can improve the accuracy of the data being analysed.
Better-informed decision-making
Streamlining the data process also means that anomalies or potential risk found within it can lead to better-informed decision-making by asset managers. These informed decisions allow asset managers to stay on top of portfolio holdings.
Faster actionable insights
Faster reporting time means that analysts can spot and implement actionable insights more quickly. By improving processes, businesses can meet more regulatory requirements, leading to better ESG reporting and scoring in the future.
Why Investors Need Streamlined ESG Reporting
ESG reports offer transparency between a business and its stakeholders and investors, providing information about the environmental, social, and governance (ESG) performance, as well as business risks.
Failure to identify these risks can have extreme consequences — such as the recent revelation that a UK branch of McDonalds and several supermarkets failed to spot well-established signs of slavery. Such situations can lead to reputational damage, a loss of stock value, and increased costs for compliance and due diligence.
By streamlining the ESG reporting process, asset managers can make better decisions about how best to diversify their portfolio to improve potential returns, stabilise their results, and protect their portfolio from risks.
Businesses that are proactive in improving their ESG reporting are more transparent and trustworthy.
For example, the Norwegian Government Pension Fund Global (GPFG) — the world's largest sovereign wealth fund — shows how improving ESG reporting can lead to better, long-term outcomes.
Over the years, GPFG has introduced environment-related investment mandates, developed clear expectations for its portfolio companies to align with global challenges, and actively monitors ESG performance.
In 2023, the fund launched a Climate Action Plan, setting ambitious goals for its portfolio companies to achieve net zero emissions by 2050. This proactive approach has allowed GPFG to build a resilient portfolio, even amid political controversy around ESG investments.
In addition to its climate initiatives, the GPFG has strengthened its governance and transparency practices by increasing its voting transparency and engaging more actively with companies’ boards and management.
These efforts have enhanced risk management and long-term value creation for the fund, while also positioning it as a global influencer in sustainable investing.
Having accurate ESG reports allows stakeholders and investors to better manage their assets. DWS, the fund arm for Deutsche Bank, learnt this the hard way when it was hit with allegations that the fund knowingly misled investors over its green credentials. This led to Union Investments, a large shareholder, to vote against DWS’ management and supervisory board.
Other investors were called on to vote against the management to protest the alleged greenwashing of reports. DWS shares were trading below the price of the initial 2018 public offering, and dropped by 23% after the allegations of greenwashing.
These examples highlight why investors need to generate the most accurate reports possible to preserve — and grow — their investment portfolio.
Automate Your ESG Reports With GaiaLens
GaiaLens provides investors and asset managers with the opportunity to report on entire portfolios in just three clicks. Our software is able to drill into — and fully explain — the detail behind the data.
The reports feature continually updated (Sustainable Finance Disclosure Regulation) SFDR, EU Taxonomy, and Task Force on Climate Related Financial Disclosures (TCFD) capabilities, ensuring reports are accurate and hold the most up-to-date information.
Our proprietary algorithm also features controversy monitoring, allowing asset managers to easily keep on top of portfolio holdings and make the most informed decisions.
Request a GaiaLens demo today, or get in touch with our team to find out more about how we can help.
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