The Data Drought in Green Finance: What We’ve Seen, What We’ve Learned, and What’s Next

A few years ago, I was helping a regional African bank structure its first green bond. Everything looked great on paper. The bank had a promising portfolio of renewable energy and clean transport projects. But when it came time to verify the “greenness” of these projects—collect data, analyze emissions, track impact—we hit a wall. The numbers just weren’t there.

We had the intent. We didn’t have the data.

That moment stuck with me. And over time, I realized this wasn’t an isolated issue. It’s a pattern repeating itself across countries, institutions, and industries.

We are facing a data drought in green finance. And it’s holding us back.

What Does This “Data Drought” Really Mean?

When we talk about a data drought, we’re not just saying that there’s not enough data.

We’re saying the data we have is:

• Incomplete
• Inconsistent
• Unverified
• Scattered

And more often than not, the data that does exist doesn’t meet the quality we need to make reliable decisions.

Imagine trying to assess a company’s climate risk without knowing its Scope 3 emissions. Or deciding on a sustainability-linked loan without insight into whether the company has a credible transition plan. These are critical gaps.

And yet, this is our reality.

READ MORE: The $38 Trillion Mistake: Why We’re Underestimating Climate Risk

Why It’s So Hard to Get ESG and Climate Data Right

Let’s break it down.

1. Too many frameworks, not enough alignment

Companies have been reporting ESG data under different frameworks: GRI, SASB, CDP, TCFD, and more. Each asks for different things. There’s no global alignment—yet.

2. Self-reported, rarely verified

ESG data isn’t usually audited like financials. So companies can choose what to report, and how. The result? You and I often see three different emissions estimates for the same company. And none of them match.

3. Scope 3 emissions: the biggest black hole

These indirect emissions—think supply chains, customer use—are often the largest. But less than 20% of the world’s biggest companies report them. That’s like trying to solve a puzzle with half the pieces missing.

4. Outdated and high-level data

We often don’t get asset-level or location-specific data. Yet, to assess real physical risk, that’s exactly what we need. Granular insights. Real-time tracking. Localized exposure.

5. ESG ratings don’t help as much as we’d like

Rating agencies each use different criteria. Correlation between major ESG ratings is often below 0.6. Compare that to credit ratings, which correlate above 0.95. You get the picture.

The Consequences? We Feel Them Daily

For investors:They’re building ESG portfolios on shaky foundations. Just ask the hundreds of Article 9 funds in the EU that had to downgrade to Article 8 when they couldn’t back up their “sustainable” claims.

For banks: In the U.S., a 2023 Fed climate stress test revealed that even the largest banks couldn’t fully analyze climate risk due to massive data gaps. They didn’t know which properties were insured or which borrowers had credible transition plans. That’s dangerous.

For sustainability teams: They spend more time collecting and cleaning data than actually driving impact. When your emissions numbers live in engineering spreadsheets, and your DEI stats are in a separate HR system, alignment is a dream and reporting is a nightmare.

For the market at large: We can’t price risk properly. We can’t reward truly sustainable performance. And we can’t stop greenwashing if we don’t even know what’s real.

Let Me Tell You a Few Stories

The Great Fund Downgrade

Back in 2022, the EU clarified rules for Article 9 funds: they had to be 100% sustainable. Turns out, many asset managers didn’t have enough data to prove their holdings met the bar. So they reclassified their funds. Nearly €175 billion in assets shifted. Investors felt blindsided. Trust eroded.

The Banks Caught Blind

In the U.S., six big banks participated in a Fed pilot stress test. To evaluate hurricane risk to real estate portfolios, they needed to know which buildings were in flood zones and insured. Guess what? Most of that data was missing. So they resorted to estimates. The lesson? Even the biggest players don’t have the ESG data infrastructure they need.

The EU Taxonomy Wake-Up Call

When the EU Taxonomy went live, many companies were required to report what percent of their revenue and capex aligned with green activities. But the majority struggled. One analysis found 88% of firms made errors or left data out. The rules were clear. The data wasn’t.

ALSO READ: The rise of ESG in Private Equity and Venture Capital

So, Who’s Doing Something About This?

Three frameworks are helping us climb out of the drought:

1. TCFD (Task Force on Climate-related Financial Disclosures)

It’s now the gold standard for climate reporting. Over 3,800 organizations support it. Many jurisdictions—including the UK, Japan, and the EU—have made it mandatory.

TCFD forces companies to talk about climate strategy, governance, risk, and metrics. It doesn’t fix data issues overnight, but it gives us structure. And structure leads to clarity.

2. EU Taxonomy

This is an attempt to define what’s actually “green.” It brings hard science and thresholds to the table. To report alignment, companies need to show specific metrics. It’s a bold move. But adoption is still rocky, and data quality is hit or miss. Still, it pushes the market in the right direction.

3. ISSB Standards (IFRS S1 and S2)

Think of this as the future IFRS of sustainability. The ISSB consolidates TCFD, SASB, and more into one global baseline. With S2 focusing on climate and S1 covering broader sustainability, this could finally give us consistent, comparable, investor-grade data. And it’s getting buy-in from countries fast.

What Can You Actually Do About It?

Here’s what I tell my clients and teams:

1. Stop relying on one source

No single dataset or rating will give you the full picture. Use multiple providers. Compare them. Ask questions. The truth usually sits somewhere in the middle.

2. Push for better disclosure

Engage with portfolio companies. Set expectations. Use your capital as leverage. If you’re lending or investing, make ESG reporting part of the deal.

3. Fix your internal systems

Get your finance and sustainability teams to work together. Build data processes that mirror your financial reporting. Use ESG software if needed. And audit your numbers—seriously.

4. Use estimates, but disclose them

Model data when you must, but be clear about assumptions. Use confidence intervals. Transparency builds trust, even when precision is out of reach.

5. Stay ahead of the frameworks

Don’t wait for mandates. Start aligning with ISSB, TCFD, and EU rules now. Early adopters are better positioned—both reputationally and operationally.

6. Build ESG literacy across your team

If your analysts don’t understand climate risk, or your risk managers don’t get ESG, that’s a problem. Invest in upskilling. Hire hybrid profiles. Sustainability isn’t a side gig anymore.

A Personal Take

I’ve seen banks pause deals because they couldn’t verify impact. I’ve seen investors walk away from promising funds because of missing data. And I’ve seen brilliant sustainability officers burn out trying to pull numbers from systems not built for the job.

But I’ve also seen momentum.

We’re not in 2010 anymore. The frameworks are stronger. The tools are smarter. The will is growing.

The drought is real, but we’re learning to irrigate. One dataset, one standard, one conversation at a time.

And the next time I help a client issue a green bond, I want us to be confident—not just in our intentions, but in our numbers.

Because when the data gets better, everything gets better.

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