Bringing financial-grade data discipline to ESG data and scoring
LSEG has fundamentally redesigned its ESG Scores to meet the next phase of sustainable finance. Elena Philipova explains why the industry now needs financial-grade data principles more than ever
Environmental Finance: LSEG has recently launched a redesigned ESG scoring framework. What triggered this?
Elena Philipova: ESG has evolved from a niche concept into a core part of global financial markets. Despite some of the public debate around ESG, the market continues to scale and grow. The sustainable debt market has reached some $7 trillion in issuance. Green equities exceed $10 trillion in market capitalisation, and there is over $3.2 trillion in assets under management in sustainable mutual funds and exchange-traded funds. According to figures from the Principles for Responsible Investment, more than $130 trillion of assets are managed by signatories committed to incorporate responsible investment principles.
The more important shift, however, is how sustainability information is being used. It is no longer only supporting specialist ESG teams. Today, sustainability data is increasingly embedded into portfolio construction, risk management, stewardship, index design, regulatory reporting and AI-enabled investment workflows. As a result, clients expect sustainability information to meet the same standards as financial data: it must be transparent, consistent, traceable and explainable.
That evolution in customer requirements is what drove us to redesign our ESG framework. We wanted to move beyond a single ESG score and provide a more transparent, modular sustainability intelligence framework that gives clients confidence in both the outcome and the underlying evidence.
EF: To what extent does increased ESG data availability support this scaling of the market?
EP: Increased data availability is absolutely enabling the market to scale. The adoption of sustainability reporting standards, including those from the International Sustainability Standards Board, the implementation of the European Sustainability Reporting Standards, improving corporate disclosure and advances in AI are all significantly increasing both the volume and accessibility of sustainability information.
But more data does not automatically create better investment decisions. In fact, as the volume of information grows, the challenge shifts from data availability to data usability. Investors need information they can trust, compare and integrate into their investment processes with confidence.
The future of ESG doesn't simply lie in a greater volume of information. It lies in returning to the principles that made financial data work in the first place. If you think about financial markets, they didn't scale because we had more data. They scaled because there was standardisation, transparency and auditability.
Take company revenue as an example. Investors know what it means. They know how it’s measured. They can trace it back to audited statements, and they can compare it across companies. That is what enables risk assessment, pricing and capital allocation.
Sustainability information is now undergoing a similar transition. Historically, investors often saw an ESG score without understanding precisely what it measured, how it was constructed, or why different providers reached different conclusions. That creates uncertainty and limits confidence in decision-making.
Our view is that the next phase of ESG is not about producing more ratings. It's about bringing financial-grade discipline to sustainability data through transparent methodologies, clear materiality, source traceability and explainable analytics.
EF: How are investors’ sustainability priorities changing?
EP: Five years ago, much of the focus was on understanding whether a company had ‘good’ or ‘bad’ ESG credentials. Today, investors are asking much more specific questions.
They want to understand transition risk, nature dependencies, involvement in controversial activities, supply chain resilience and the financial implications of sustainability issues. Increasingly, sustainability is being analysed alongside traditional financial metrics rather than as a separate discipline.
That means clients no longer want a single ESG score that tries to answer every question. They want different pieces of sustainability intelligence, depending on the investment decision they are making.
EF: Where do you think the biggest opportunities for innovation are?
EP: The next wave of innovation won't come from creating another ESG score. It will come from connecting different sustainability datasets in ways that help answer real investment questions.
For example, investors don't make decisions based on sustainability performance alone. They also want to understand climate transition readiness, controversies, involvement in controversial activities, green revenue exposure and other signals that provide additional insight into long-term business and financial resilience. Looking at these dimensions together enables much better investment analysis than relying on any single metric in isolation.
This thinking informed the design of our new ESG scoring framework. Rather than treating ESG, climate, controversies, product involvement, bond issuance and country ESG risks as separate products, we've brought them together into a modular sustainability intelligence framework. Clients can start with an overall sustainability assessment and then drill into the specific dimensions that matter most for their investment strategy, risk appetite or regulatory requirements.
At the same time, AI is creating entirely new opportunities to help clients navigate increasing volumes of sustainability information. But AI will only create value if it is built on trusted, structured and well-governed data. We see AI as an accelerator of sustainability intelligence, not a replacement for the transparency, governance and data discipline that investors increasingly expect.
EF: Where do you see the market in five years?
EP: I think we'll stop talking about ESG data as a separate category.
Just as investors don't distinguish between income statement data and balance sheet data, sustainability information will increasingly become another dimension of financial analysis. It will simply be part of how markets assess risk, opportunity and long-term value creation.
Success won't be measured by how many sustainability metrics exist. It will be measured by how effectively that information helps markets allocate capital, manage risk and support better business decisions.
Elena Philipova is director, sustainable finance and investment at LSEG. For more information, see: lseg.com/en/solutions/sustainable-finance
