The Real Price of Having Accurate Data
How sustainable investing has evolved
Gone are the days when investing focused solely on financial returns; but, like any shift in norms, this evolution comes with its learning curves. Sustainable investing continues to gain momentum as investors seek to align their portfolios with various sustainability principles. Asset managers are increasingly integrating extra-financial metrics into their strategies, responding to client demand and regulatory expectations. However, as sustainable investing grows in popularity, so does regulatory scrutiny. Shortly after the EU finalized the Sustainable Finance Disclosure Regulation (SFDR), the SEC has tightened oversight on sustainable portfolio claims, requiring firms to back their assertions with verifiable data.
Regulatory scrutiny causes increased attention
This shift has resulted in major penalties for asset managers failing to provide accurate and transparent sustainability disclosures. Recently, the SEC fined a New York-based fund manager $4 million for misrepresenting its exclusionary screening, failing to properly assess involvement in areas like fossil fuels and tobacco despite marketing claims. Similarly, another US-based investment manager faced a nearly $14 million fine for misleading statements about its ESG investment practices. These actions highlight a growing regulatory trend: sustainability disclosures must be well-intentioned, but more importantly demonstrably accurate.
The need for real, vetted extra-financial data
As firms navigate this evolving landscape, the need for vetted sustainability data has never been greater. Moving forward, asset managers will need to ensure complete transparency in their reporting, with clear documentation of controversial analysis, sustainability metrics, and portfolio alignment with stated sustainability goals. Regulators are no longer accepting vague or overstated claims—they want quantifiable, traceable data that can withstand regulatory scrutiny.
SEC’s push for accountability
The SEC’s increased focus on sustainable investment disclosure signals a shift from broad commitments to data-backed accountability. Asset managers must now enhance their data collection processes, integrate verifiable extra-financial data, and ensure accurate reporting to avoid reputational and financial risks. As enforcement intensifies, firms that invest in robust data infrastructure will not only stay ahead of regulatory expectations but also build stronger, more credible sustainable investment strategies.
Accessing the best data has never been easier
To help investors navigate the increasing need for vetted extra-financial data, Physis created ImpactChat.AI and the Physis Platform, two solutions created to make investor’s lives easier. These tools provide access to the highest quality data, including sustainability insights on 14,000 companies and 335,000 funds. By leveraging AI-driven data extraction and validation, Physis ensures that investors can accurately assess risks, comply with evolving regulations, and construct portfolios that outperform. As the demand for verifiable extra-financial data grows, Physis empowers investors with the transparency they need to stay ahead in the new era of sustainable investing.