Alt data is now mainstream. Today, roughly half of investment firms use alt data, according to Bank of America. It’s likely to grow as more firms invest in new technology post-pandemic and as they orient investments increasingly toward sustainability.
Social media feeds, satellite imagery, credit card transactions, geolocation data, and weather forecasts are all being used to derive insights, including identifying responsible investing opportunities.
But data – including alt data – is not Lego. And big data can mean a big mess. While the growth in alt data is enormous, in isolation it’s as useful as buying a trailer when you don’t have a car. It has to connect to something or it means nothing at all. The focus has to be on collection, connection, and relevance.
When it comes to wider standardization, there are plenty of areas where data management is hampered by a lack of global standards. Environmental, Social, and Governance (ESG) data is a prime example. As the focus on ESG investment grows, so too does the need to apply standards for ESG data. We are just at the beginning of ESG data – an inverted pyramid, and we are at the bottom, right at the inverted tip of standardization and application.