Alternative Data In ESG: The Regulatory Risks

Alternative data is big business.  Globally, buy-side firms spent $1.71 billion on it during 2020¹, over half of all hedge funds use it to make investment decisions, and it is increasingly used to validate the sustainability claims of prospective ESG investments. 

In January, the Financial Conduct Authority published a Feedback Statement, Accessing and Using Wholesale Data, following a 2020 Call for Input. The considered firms' use of alternative data and its potential risks.  Alternative data and its application will inevitably increase, as firms develop systems and technologies that can produce more meaningful, reliable and profitable insights.  In turn, regulatory attention will likely become more focused, and the related risks more clearly identified.