Back to Blog

Why thematic investing leads to better ESG analysis

Environmental, Social and Governance factors are now familiar concepts to investors, business owners, governments and regulators. They’re criteria that guide our decision-making beyond pure profit—that add a lens of wider responsibility to our choices, and hold us accountable to them.

The fact that ESG is now a core consideration for the vast majority of institutional investors and wealthy individuals is proof of value—not only in terms of its wider societal impact, but in allowing Asset Managers as fiduciaries to ensure returns don’t suffer.

And yet… Depending on where you look, there are still wild discrepancies between how ESG factors are measured. This makes it hard for investors to confidently and consistently index ESG when making investment decisions. And while regulation is tightening and industry standards are hardening, this lack of clarity still makes companies susceptible to issues like greenwashing.

If you’re a thematic investor, you’ll know that comprehensive, relevant, and nuanced data is one of the best weapons against unclear or obfuscated ESG ratings—and one of the best enablers for socially and financially sound investment decisions.

Here’s why that’s now possible at scale and on repeat.

The clarity conundrum

ESG ratings are essentially information black holes, failing to provide relevant details on why companies are considered compliant or not.

You can see the results; look at comparisons between various leading ESG rating providers and you’ll see ratings are given almost at random. A company may receive totally different ratings, depending on the agency you work with.

And in the face of this inconsistency, investors and regulators are demanding more granularity, to prevent greenwashing and risk, while ensuring fiduciary obligations are met to achieve best returns.

All of this means that Asset and Wealth Managers need to go deeper. Rather than relying on obscure and unreliable ratings, you need to leverage expertise and insights to make transparent, explainable investment decisions.

All of this means you need to expend significant and time-consuming manual effort to find insights of sufficient quality. AI has become an increasingly effective tool to ease the burden on research teams—and combined with the Thematic Intelligence approach, enables next-gen ESG investors to keep process efficiency and accuracy high.

Illuminate your ESG factors

Your ESG implementation should inform the data sources you use. To do that you need a comprehensive and efficient screening process that lets you tap into a universe of clearly defined and relevant companies.

Themes allow a more granular and sophisticated approach to ESG. A thematic approach means portfolio managers can build up their understanding of individual ESG factors by extracting relevant insights from unstructured data sources on an array of niche topics— from data centre cooling and AI, to battery recycling and electric vehicles.

That way, you can build a portfolio with sufficient choice, liquidity, and risk diversification that matches your investors’ preferences. Crucially, you can act independently of the inconsistent and mismatched array of ESG assessments from other data providers.

By adding additional transparency, context, and explainability, Asset and Wealth Managers can ensure funds deliver on their promises—something that’s becoming more and more crucial as regulatory scrutiny tightens.

Affinity can help

We designed the Affinity platform to help Asset and Wealth Managers extract the best possible thematic insights from unstructured data.

When merged with your terminal’s structured and quantitative data, you’ll unlock clear, deep, and actionable results that guide your investment decisions.

Affinity’s AI web-crawler, API integration and insights hub makes it easy to capture, assess and act on comprehensive and relevant ESG insights, and wider market trends. If that sounds like something you need, we should talk.


Contact us

We use cookies for statistical purposes to better understand your usage behaviour and to optimise our website design. For further details, please refer to our Data Protection Statement and Cookie Policy. You can withdraw your consent at any time using the link in the site footer.