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Datamaran raises £11.7m for real-time ESG risk management solution

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UK software start-up Datamaran has completed a £11.7 million series B funding round to further the development of its automated ESG risk management platform. 

  • Datamaran’s software helps businesses assess more than 400 external risk factors in near-real time to support their development and communication of effective ESG strategies. 
  • The platform’s focus on external risks highlights the increasing adoption of double materiality frameworks in stakeholder communications. 
  • Increasing demand for risk reporting that includes external sustainability impacts will likely see the emergence of several new platforms offering similar capabilities to those demonstrated by Datamaran. 

Datamaran’s patented technology allows users to identify and monitor over 400 external risk factors, tailored to their particular sector, location and body of stakeholders. The automated platform provides ongoing monitoring in near-real time, including regular scans for new regulation and trends in media representations and corporate disclosure expectations. 

It can be used by businesses to conduct double materiality assessments, benchmark their ESG progress, and develop long-term strategies for improvement. It incorporates stakeholder surveys, which provide a holistic overview of how risks are perceived, with simplified data visualisations allowing emerging risks to be identified and addressed immediately while existing risks can be monitored over time. This data can then be reviewed and adapted for presentation to various stakeholders. 

The start-up plans to use its latest funding, which was led by industrial technology conglomerate Fortive (NYSE:FTV) and electricity provider American Electric Power (AEP) (NASDAQ:AEP), to continue developing its product and hire more employees in the US.  

According to Datamaran CEO and co-founder Marjella Lecourt-Alma, “this investment provides us with the capital necessary to match the growth opportunities that are increasing at an ever-faster pace as customers, employees and regulators double down on their ESG expectations.” 

Sandy Nessing, AEP’s chief sustainability officer adds that, “the ESG landscape is constantly evolving; having access to data-driven information about how and when those changes are occurring allows us to identify emerging issues and trends that could impact AEP. Datamaran’s platform supports monitoring of material ESG issues at any time”. 

The need for double materiality assessments in ESG risk monitoring 

Datamaran’s technology has already been used by J.P. Morgan (NYQ:JPM) to power the double materiality assessment modules of its own ESG management platform. By incorporating double materiality assessments based on external ESG risk factors, the financial services provider enabled its clients to better understand the long-term societal and environmental impact of companies they may wish to invest in. 

Double materiality frameworks enable this holistic perception by going beyond the consideration of financial risks facing a company to include material risks and opportunities associated with the company’s outward impact on society and the environment. 

The inclusion of double materiality assessments is becoming increasingly important as stakeholder pressure to deliver credible action on ESG targets continues to rise.  

Indeed, the Global Reporting Initiative (GRI), one of the most commonly used ESG reporting standards, includes double materiality as one of its guiding principles. In a white paper commissioned on the subject, the GRI concludes that financial materiality assessments are incomplete without the consideration of external sustainability impact. 

The paper goes on to explore the need for transparent, objective and trustworthy reporting of both positive and negative impacts on sustainability. It finds that such reports are necessary in meeting the requirements of both investors and regulatory authorities, providing opportunities for enhanced stakeholder engagement, and that clear disclosure of double materiality assessments can improve both financial performance and investment decision-making. 

From ESG to impact investment 

The increasing acknowledgement of double materiality assessments as a vital component of corporate ESG strategies comes at a period of significant backlash against ESG as an investment lens in itself. 

ESG ratings have been widely misunderstood to reflect the sustainable impact a company has, when what it actually provides is an understanding of the financial risks to a business caused by environmental, social or governance factors. 

This misunderstanding has caused stakeholders to feel misled by ESG ratings based largely on internal financial materiality assessments. In response, the demand for alternative frameworks that paint a picture of long-term, external sustainability impacts is on the rise. 

Although it is widely considered to offer lower financial returns, the market for impact investment continues to grow, with the Global Investor Impact Network estimating its value as having reached around $715 billion in 2020

With demand for impact analysis and double materiality approaches on the rise, technologies that are capable of measuring, comparing and reporting on a company’s risks and contributions to solving global challenges will be crucial in transforming ESG from an investment lens to an impactful practice that aligns with stakeholder values. 

As such, Datamaran’s prioritisation of external risk factors and double materiality assessments provides an early example of what is likely to become a growing trend in the development of risk management platforms. 

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