EP 54: ESG in 2026: What the Data Says About Investor Priorities

Josh Green: Welcome back to Sustainable Intelligence, where we break down what sustainability really means for the private markets. I’m Josh Green, Co-CEO and Co-Founder of Novata. 

At Novata, our Metrics and Regulations team sits right at the center of how sustainability data is evolving. They’re a group of experts who track global ESG and sustainability requirements in real time, from regulations to shifting investor expectations, then translate that complexity directly into Novata’s platform and metrics so that investors and companies can focus on what actually matters. 

Today, I’m joined by a key member of our team, Aaron Zweig, who will be diving into our recently released 2026 ESG Metrics Guide, which he helped produce. We’ll explore what the latest data tells us about how investor priorities are shifting, where reporting is becoming more sophisticated, and how sustainability data is increasingly being used to drive decisions in private markets.

Aaron, welcome to Sustainable Intelligence.

Aaron Zweig: Good afternoon, Josh. Good to be here. Thank you.

Josh: This is the fourth ESG Metrics Guide that Novata has published. For our listeners, can you give us an overview of what this guide is and what types of insights it can provide?

Aaron: Yeah, absolutely. So the Metrics Guide is an annual analysis that Novata conducts on its own data to see what investors are asking from their portfolio companies. So it acts as a microcosm for the ESG market and provides insights into annual and emerging trends. Happy to go into more of the, you know, methodology, what this looked at and the data behind the report.

But right before we do that, Josh, this is my first Metrics Guide that I’ve been at Novata for, I’d love to know, you know, what inspired Novata or yourself to publish the first Metrics Guide four years ago?

Josh: Woah Aaron, I’m hosting this podcast. You,

Aaron: Sorry.

Josh: you are taking over the hosting responsibilities. No, it’s actually a good question, and I think, I think it’s been a theme from the very beginning, frankly, that people wanna know what other people are doing.

Aaron: Yeah

Josh: And our customers have said, “Look, you know, I have my own agenda. I have what I think I’m solving for, but can you give me a sense of what the broader ecosystem is up to?”

And I think that’s where the metrics guide was born. We wanted to look at it systematically once we had a critical mass of customers on the platform to make sure we understood what people were asking and how that was changing over time. And now that we’ve been at it for a few years, we really can see those changes. So with that as historical backdrop, maybe you can give us an overview of some of the changes that we did see in the data. What are the key findings that stood out most to you?

Aaron: Yeah, absolutely. So, just before I dive into that, I think it’s important to just tee up that, you know, we looked at several datasets. We’re looking at data from Novata’s inception till now, Q1 over Q1, year over year, and for the most part, we’re analyzing two different variables, right? We’re looking at percentage change to capture metric momentum and pullback.

While also looking at absolute change to understand true scale of adoption. So I just wanna highlight that before we go in and just say, you know, unless otherwise specified, these figures are percentage change and not percentage points, and all of the metrics we’re discussing are all looking at basically, you know, how often these metrics are being asked by DRs, data requesters, to data providers.

Josh: Okay, So our investors are asking questions of their portfolio companies. We’re tracking which of those, which questions are being asked more frequently, which questions are being asked less frequently.

Aaron: Correct.

Josh: So what’d you…

Aaron: Yep.

Josh: So what’d you see in the data?

Aaron: So we really saw five areas that stood out. We saw climate targets and strategy, workforce dynamics, DEI and gender, some environmental topics that are non-carbon related, and, as I know is a very hot topic now, AI governance, so it shouldn’t be a surprise it’s there. We’re seeing this huge shift, I think, from, and, the data reflects it, from data collection to action.

Action’s been something that’s been discussed for a long time, but I think while it’s been going on, it’s really gaining momentum now. So climate targets and strategy. We’re seeing between, you know, 8% to 15% increase in decarbonization strategy being asked, short-term GHG target, long-term net zero target.

You know, all of these are on the rise. The ask has moved from measurement, Scope 1, 2, 3, for instance, to action. Not that Scope 1, 2, 3 are dropped, but they are, 9 out of 10 investors are asking that question already. Now what do we do with that answer?

Josh: Do you think that reflects an evolution in the market in terms of how people approach sustainability data collection and management? Is this the market becoming more sophisticated?

Aaron: Absolutely. I think we’re seeing a real shift, and I think it demonstrates real maturation in the market. In the early days of ESG reporting, just having a number was enough, and if you weren’t acting on it, it doesn’t really matter how you get that. Investors really wanna know, what is the data? How are you getting it? What are you doing with that data? What does your company look like in five years? What does it look like in 20 years? They wanna know are we, you know, is this synergistic relationship in it for the long run, or do we have to pivot if things align with our goals or not because all of these, you know, decisions affect the value chain.

Josh: Okay. So Carbon, I think you said Workforce. What’d you find there?

Aaron: Workforce dynamics. Yeah. So we saw that turnover number, for instance, is up 20% and employee satisfaction score is up 72%. Investors really want to know health, the workforce health of a company, not just the headcount.

Josh: And just to clarify, it’s not that employee satisfaction itself is up that much.

Aaron: Correct.

Josh: We don’t have happier workers out there. It’s that the percentage of our investor customers who are asking questions about the actual satisfaction score that has increased.

Aaron: Yep, that’s right, Josh.

Josh: And so, what is, what’s behind this? Is there, is this similar in terms of kind of an increase in sophistication level in terms of the types of questions that people are asking?

Aaron: Yeah, I think that’s absolutely the case. I mean, some of this, and I’ll get into it maybe a little later, is obviously about, you know, growing sustainability regulations and frameworks, and people want to know what’s going on. But at the same time, I think companies, and investors really want to know what’s going on at their companies.

They don’t just want to know, like, you know, how many people do you have? What are they doing? You know, how many have you changed from last year? But really it’s, do you guys have this long-term approach to strategy and not a short-term, you know, one or two-year checklist anymore?

Josh: Yep. All right, so we’ve talked about some of the forward-looking carbon targets, workforce dynamics. What else did you find?

Aaron: So, what I think is most fascinating is what we found with DEI and Gender. We found that metrics with the term, the phrase, DEI in it plummeted, which shouldn’t necessarily be a surprise given this current political climate. DEI training, so again, this is investors asking about do you have a DEI training program or anything like that, dropped 32%.

We look at DEI and formal governance structures, also dropped by about 30%. DEI policy, do you have a DEI policy, dropped less, 10%, but it’s still pretty significant. But metrics measuring DEI outcomes without the DEI label actually increased. So over 60% of investors are now asking C-suite and gender pay gap data, which I found really interesting.

You know, it shows that these metrics are sticky. We’ve had this conversation many times just in general, that metrics are sticky and they’re gonna keep being asked. At worst, these metrics are just being rebranded, but the data is still being collected, and if anything, it’s getting more granular is what we’re seeing.

Josh: Interesting. I mean, that tracks with, I think, what we’ve seen with ESG as a whole, right? I mean, the acronym became a political football, and we saw people retiring the use of that acronym while still doing the substantive work underneath it. Sounds like DEI is that in a more focused way.

But certainly, I think tracks with the intuition that you have about how the political environment has shifted. Okay, what else?

Aaron: So we have two more, non carbon-related environmental topics. Obviously, this is a big deal. Carbon was the breadwinner of the environmental story for the last couple of years. But we look now and we see, you know, investors are asking about emissions to water 15% more, renewable energy, less surprising, but 15% more, biodiversity impacts up 10%, and hazardous waste is also about, up about 10%, right?

So as I said, this is clearly because of some, you know, increased granularity in terms of global sustainability regulations and also some climate risk mapping. They’re both driving this, but it does reflect, we think a broader, a broader shift, right? Carbon is no longer the sole data point used to capture the full environmental story of a company, and investors want the whole, you know, holistic picture.

Josh: Yep, and then AI?

Aaron: AI. Yes. So this is an emerging area with a really clear trend. Responsible AI Policy, so do you have a responsible AI policy, grew by about 1500% and AI Code of Conduct by 50%. Now, before you ask about that number, the 1500% sounds really staggering, and it is, but in absolute terms, it moved from 0.4% of all data requesters asking this to about 8%. It’s still, you know, 17x

Josh: Still massive. Yep.

Aaron: in a single year. This is just– this particular one is just Q1 2025 to Q1 2026. So we’re not even capturing the last two months roughly of 2026.

And what is staggering to think about is if even half of the momentum continues, Responsible AI Policy could hit 60% of requesters by the next Q1, putting it on par with Women in C-suite and Gender Pay Gap, which has taken years to get to this point.

So it’ll be very interesting.

Josh: That’s fascinating. I mean, it certainly aligns with, I think, what we’ve seen in terms of the explosion of AI.

Aaron: Yeah

Josh: In terms of, you know, the consumer experience being a user of AI. I think, as a business leader, I think seeing the way in which AI has proliferated through our organization the last few months, it’s been, it’s been a sea change, and I think it sounds like we’re seeing that in the metrics as well in terms of people trying to stay on top of it and their finger on the pulse of what their portfolio companies are up to.

But interestingly, I mean, 8%’s still a modest number.

Aaron: Yep

Josh: I think it’d be an interesting wager in terms of what we think it’ll be next year around this time.

Aaron: Yeah. It definitely will be interesting. I mean, I think a lot of investors are trying to decide their approach to AI, how to ask questions about it, not to step on toes. so, so it will be interesting to see, but I’d be very shocked if that number didn’t, you know, grow significantly from 8% to somewhere closer to maybe 40 or above next year.

Josh: And the question specifically is around do you have a policy? Do you have a responsible AI policy?

Aaron: Correct. The first one was about do you have a responsible AI policy? And the second is do you have an AI code of conduct?

Josh: Okay.

Aaron: And who knows if those questions will be the actual ones that grow, but I have no doubt that AI governance questions will be in the top of everyone’s mind next year as I’m sure it is currently.

Josh: Right. Okay, let’s talk a little bit about, kind of, beyond the headlines. What are you seeing in terms of the move towards transparency around estimates and assumptions and data gaps?

You know, it feels like in the earliest days of Novata, there was just the questions and the answers, but now it feels like there’s a desire for more transparency. Are you seeing that as well?

Aaron: We’re definitely seeing that. You know, there’s this huge shift, which I probably said five times and I might say it five more times, from data collection to action. If you’re not acting on good data, it’s not really clear where you go from there, right?

So investors want to know what was estimated, what was measured, where the data gaps are, because again, as we say all the time at Novata, if you’re gonna act on data, you have to trust it, right? It’s this shift from, in essence, collection to credibility. And I think that’s a significant step forward for the industry.

I think it’s really good. I think we’re finally starting to question where the data’s coming from, and how we can get better data so it can be actioned on, as opposed to just checking off a box of, “Yes, we collect scope data,” and sending it off to comply with some regulation.

Josh: Yeah, it’s interesting. If you think about the progression, right, at one point it was you had an ESG policy as an investor, you got the check mark, right? 

Aaron: Yeah

Josh: And then it was, well, are you collecting data? Didn’t matter what the data said, but if you were going through the process of collecting it, you were on the cutting edge, right?

Aaron: Right.

Josh: And then, you know, it does feel like the market’s maturing a bit and moving, to your point, to a place of trying to take action on the data. But that feels like, in some ways a natural progression, but also it feels like a response to pressures that the sustainability community’s under, right? The pressure to prove that there’s a business case for this work.

Aaron: Absolutely

Josh: To prove that there’s, you know, and dollars and cents can be measured around sustainability metrics. 

So let me lift up from the analysis of the metrics specifically and get your take as somebody who’s living and breathing this stuff. We are in a bit of a turbulent moment for sustainability and, we’ve been through a period of really rapid growth, then some pretty intense pushback, now some stabilization. But it does feel like people in our ecosystem are, kind of, wondering about how things are gonna unfold from here. So two questions. You know, if you had to pull out your crystal ball, how do you think things are gonna evolve from here? And then two, what advice would you give to practitioners in terms of navigating this turbulent moment?

Aaron: Those are good questions. Let me answer your second first, just because I think we’ll have more to talk about on the first one. I’m anticipating some questions back. So advice for other ESG professionals. You know, I would say, as you said, the ESG sector over the last five years ballooned and contracted, and I really do believe that it is now on a steady increase.

Words like ESG, DEI, climate risk, maybe they’ll be rebranded as operational efficiency. It doesn’t really matter, the point stands that investors know these data points help their businesses and benefit the lives of their employees, which again, in turn, helps their businesses. So my advice would just be don’t be distracted by the noise, and there’s a lot of noise. But I really do think that, you know, the interest in ESG isn’t going anywhere. And I think the best way to put it is, you know, if investors are still interested in ESG data in this political climate, I’m excited to see what happens in the next few years.

Josh: Yep. All right, that’s good advice. Stay focused. Don’t get distracted. Hard advice.

Aaron: Very hard, hard advice

Josh: Hard advice to follow, but very good advice. All right, and so now, where do you think things go from here?

Aaron: Crystal ball. I mean, I really do think that the next crucible in the ESG industry is AI governance. I mean, from a legislative standpoint, there’s still very little in place, and I’m not sure how much that’s really gonna change in this AI race, you know, globally. But while AI can pose a significant benefit to companies, as you know and I’m sure you think about every day, there are also significant risks.

They span every pillar, bias and privacy violations on the social side, reputational exposure and fiscal over dependence on the business side, AI’s energy intensive infrastructure, right? Environmental side, not even including like water and emissions, right? All of that. And, investors will wanna know how companies are using AI and if there are any governing mechanisms in place.

So seeing this trend from this metrics guide, the Metrics and Regulation team actually created the Responsible AI Essentials framework. So this framework is grounded in leading sources, including the National Institute of Standards and Technology, EU AI Act, OECD AI principles, ILPA, World Economic Forum, list goes on.

We wanted to make sure that there was an AI framework out there that was accessible to everyone and not just AI specialists. So we think that’s really important and that’s where we think, crystal ball-wise, where we’ll be next year or in the coming months even.

Josh: Yeah, the hunger for AI insight into how companies are managing the risks around AI feels insatiable. You’re seeing it in the metrics. We see it with our GP advisory committee, which is a group of our largest GP clients who, at the beginning of the year, as we asked them for insight into what was top of mind for them, two things came up repeatedly. One was value creation and how you actually take the data and get to a place where you’re taking action, which I think you’re also seeing in the metrics, and the other was AI, right?

Aaron: Absolutely.

Josh: All right, well, let’s close with a little bit about you and how you got into this work. Curious what brought you into the ESG space, what first piqued your interest, and what keeps you motivated? What, what keeps you going?

Aaron: Yeah, it’s a good question. I got into the space after my master’s in environmental science and policy. I was really heavily focused on carbon accounting at the time, and after doing some greenhouse gas inventories and analyzing carbon footprints, I realized there was real actionable data there, something companies could work on on an annual basis and see genuine progress at the end.

I think in 2021, 2022, there was this big emphasis on sustainability reporting and, while that’s fantastic, I really like numbers, which should be no surprise since I’m on the Metrics and Regulations team. So since then I’ve expanded into, you know, the broader ESG space, which has been both exciting and illuminating.

And what motivates me most, I think, is something you said really early on in this podcast, right? The hope that investors and companies will come to see that ESG gains, specifically environmental and social gains, they don’t have to come, at least, at a financial cost.

In fact, with the right approach, they often don’t. And so, that motivates me, and I’m hoping that these actionable changes that are happening are, or I guess the desire to have more action with the ESG data, can prove that and can really drive the, you know, the market forward.

Josh: Yeah, it feels like there’s a real evolution in terms of data collection to now, let’s identify the low-hanging fruit where you can both generate positive financial return and see some benefits on the environmental or social side. And I’d love for us to get to a place where that was, you know, the low-hanging fruit was easy to pluck, right?

And we got you to that point where you’re taking those actions at a minimum very quickly. And then accelerating to the next phase of, okay, now let’s identify the harder investments that maybe take a little bit longer to pay off, but still are, you know, both positive from a financial perspective and from a social and environmental perspective. 

But it’s gonna be a process, right, to get there. But you’re a part of that process in terms of helping people understand what metrics they should be collecting and ensuring that they collect data that is a solid foundation for them to act on. So I wanna thank you for the work that you do. Thank you for the time today.

Aaron: Thank you.

Josh: And, that’s it for this episode. Until next time, let’s keep building sustainable intelligence together. As always, you can find out more at Novata.com.