What Investors Really Want: The ESG Data Quality Standards Driving Capital Markets

How Comparability, Alignment, and Rigor Are Reshaping Corporate Sustainability Reporting

When Catherine Atkin, co-founder of Global Digital Market Data Alliance and key architect behind California's climate legislation, sits across from Fortune 500 executives, she hears the same message repeatedly: "We want comparability, we want alignment." This isn't just regulatory compliance speaking—it's capital flowing toward companies that can demonstrate sustainable performance through reliable, comparable data.

The shift from voluntary ESG reporting to mandatory disclosure frameworks is creating unprecedented demand for data that meets investor-grade standards. Companies that understand this transition are positioning themselves to access capital more efficiently, while those clinging to outdated approaches risk being left behind in an increasingly data-driven marketplace.

The End of Voluntary Reporting Patchwork

As Catherine explained during a recent panel discussion on investor expectations, the "Swiss cheese of voluntary reporting was not allowing the markets to flourish." Investors have grown frustrated with inconsistent methodologies that make it impossible to compare sustainability performance across companies and sectors.

This frustration has catalyzed regulatory action across multiple jurisdictions. California's landmark climate legislation (SB 253 and SB 261) represents a deliberate effort to align with emerging global compliance regimes rather than creating yet another proprietary framework. The goal: enable investors to evaluate companies using consistent metrics that translate across borders and industries.

Ashley Pleasant, who leads the sustainability practice at Weaver, reinforced this point by emphasizing that ESG data should be performed with the same rigor as financial reporting. "ESG data is a non-financial performance metric. It still tells the story of the health of the company," she noted.

What "Alignment" Really Means for Companies

When investors talk about alignment, they're referring to compatibility between different reporting frameworks—from the International Sustainability Standards Board (ISSB) to the Corporate Sustainability Reporting Directive (CSRD) to California's requirements. Companies that design their data collection and reporting processes to satisfy multiple frameworks simultaneously gain significant operational efficiency.

This alignment strategy offers several advantages:

Cost Efficiency: Single data collection efforts satisfy multiple regulatory requirementsMarket Access: Consistent reporting enables comparison across global capital marketsRisk Reduction: Standardized approaches reduce compliance errors and potential litigation exposureStakeholder Confidence: Investors gain trust in companies using recognized, rigorous methodologies

The Data Quality Imperative

Beyond alignment, investors are demanding higher quality data that can support investment decisions. This means moving from spend-based estimates toward primary data collection wherever possible. Brad Docker, founder and CEO of Green Gen, emphasized the practical business case: better data enables "very active engagement" that helps companies identify where to prioritize interventions and measure actual improvements.

The data quality imperative is driving three key shifts:

1. From Estimates to Measurements: Companies are investing in systems that capture actual consumption, emissions, and impact data rather than relying on industry averages or spending-based calculations.

2. From Reporting to Action: High-quality data enables companies to identify specific opportunities for improvement and measure the effectiveness of sustainability interventions.

3. From Compliance to Value Creation: Organizations that treat ESG data as strategic business intelligence rather than regulatory overhead are discovering new sources of competitive advantage.

The Role of Technology in Meeting Standards

Modern ESG reporting requirements generate enormous amounts of data that human teams cannot process effectively without technological assistance. Peter Mayer, partner at SDFM, pointed out that "without AI we're lost in this entire scenario" given the volume of information companies must now collect and analyze.

However, technology implementation requires careful consideration of governance and oversight. The most successful companies are those that deploy AI and automation tools while maintaining human validation processes to ensure data accuracy and regulatory compliance.

Building Investor Confidence Through Transparency

Peter also highlighted a critical insight about investor psychology: "You don't want to find yourself as investor having invested in a company that relies on inaccurate data." This observation explains why investors increasingly scrutinize not just ESG metrics themselves, but the processes companies use to collect and validate their sustainability data.

Companies building investor confidence are focusing on:

Data Provenance: Clear documentation of how data is collected, validated, and processedAudit Trails: Systems that enable third-party verification of sustainability claimsMethodology Transparency: Open communication about data collection approaches and limitationsContinuous Improvement: Regular updates to data quality and reporting sophistication

The Business Case for Quality ESG Data

The panel discussion revealed that companies treating ESG data quality as a business investment rather than a compliance cost are seeing tangible returns. These organizations report:

• Improved access to capital markets and better terms from lenders

• Enhanced operational efficiency through better resource management

• Stronger stakeholder relationships with employees, customers, and communities

• Reduced regulatory and litigation risks

• Competitive advantages in markets where sustainability performance matters

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Looking Forward: Market Evolution

As ESG reporting standards continue to evolve, companies that have invested in robust data collection and reporting capabilities will be best positioned to adapt to new requirements. The trend toward mandatory disclosure is accelerating globally, and the organizations that view this transition as an opportunity rather than a burden will capture the most value.

Catherine's work on California legislation demonstrates how policy makers are attempting to balance regulatory clarity with business practicality. The goal is creating market conditions where sustainable companies can access capital efficiently while ensuring investors have the reliable information they need to make informed decisions.

Getting Started: Practical Next Steps

Companies looking to improve their ESG data quality and investor appeal should consider:

1. Assess Current Capabilities: Evaluate existing data collection processes against investor requirements and emerging regulatory standards

2. Prioritize Materiality: Focus initial efforts on sustainability topics most relevant to business operations and stakeholder concerns

3. Invest in Systems: Implement technology solutions that can scale with evolving reporting requirements

4. Build Governance: Establish clear processes for data validation, quality control, and continuous improvement

5. Communicate Transparently: Share methodology improvements and data quality enhancements with stakeholders

The companies that recognize ESG data quality as a competitive differentiator—rather than just a regulatory requirement—will be the ones that thrive in the new landscape where sustainability performance directly impacts access to capital.

Ready to transform your ESG data strategy? Contact our sustainability experts to learn how advanced data collection and reporting systems can improve your investor appeal and regulatory compliance.