Sustainable finance, now a must have! Or why we invested in Datia

The number of sustainable finance regulations and policy interventions is accelerating. In parts caused by the role that sustainable finance plays in delivering on the policy objectives under the European green deal and the European Union’s international commitments on climate and sustainability. And on the other hand, driven by retail investors demanding more sustainable investment products and wanting to know more about how companies are operating before investing their money.

All of this is putting pressure on investors to meet market and regulatory demands with the global ESG reporting market expected to grow at a CAGR of 17% to reach $16 billion by 2027.

Demand / Investor side: Trying to make sense of ESG data

This environment is creating headaches for many asset and wealth managers as they make sense of the ESG data available to:

• Understand:
  1. Can I offer sustainable products?
  2. What companies are underperforming in terms of ESG?
  3. Which ESG risks am I taking?
• Engage:
  1. Increased pressure to be an active owner
  2. Increased workload to log and track engagements
  3. Increased workload on reporting on engagements
• Communicate:
  1. Increased regulatory reporting requirements
  2. Increased pressure from internal stakeholders
  3. Increased pressure from distributors, platforms and clients

For a single company, this may already entail more than 40 data points. Now add the additional layer of industry data and combine this to understand how a company fares against the competition.   No wonder many asset and wealth managers are at a loss of how to interpret and use the data, while trying to keep up with the changing regulation.

Datia, the one-stop-shop for sustainable finance

That’s where Datia comes in. The platform is built to become the one-stop-shop for all sustainability work. It contains three modules to cover the ESG needs of investors:

• “Understand” allows investors to analyze portfolios and get a comprehensive view on the sustainability of their investments. Enabling to drive impact investment strategies and compliance with ESG regulations like the SFDR and EU Taxonomy.
• “Engage” to track engagement with portfolio companies, e.g. in general meetings, and collect all relevant data in one place, and finally
• “Communicate”, a toolset to generate sustainability & regulatory reports

The target group addressed by Datia are asset managers, wealth managers and investing platforms, the latter via an API-first approach. Such investing platforms, i.e. online brokers or neo banks, use Datia to offer information about company scores in terms of ESG (e.g. carbon footprint, board gender diversity) to their respective customers (private retail investors). In a later stage, Datia also aims to target corporates to collect ESG data and to make them available to investors.

How the idea was born

Juan Manuel Serruya, an early employee at Spotify, and Manne Larsson, formerly at EQT Ventures and InsiderLog (a Market Abuse Regulation SaaS solution that was acquired by Euronext in 2016), met in Buenos Aires years ago. In 2019, after years of being simply friends that discussed the role of sustainable finance in creating a better world, Juan asked Manne to join him as COO of Datia.

Why we choose to invest in Datia

As a thesis-driven VC we always look for investments that fit a narrative that we believe in. In each fund we have a number of active theses and we look for investments that fit into them. Lately, we have become increasingly interested in Climate, Sustainability and Inclusion as a thesis and we are actively looking for digital platforms that tackle these problems. Within this context, we found that Datia fits very well into our strategy:

• Growth of sustainable funds: Sustainable funds attracted all-time high inflows of €120 billion in the first quarter of 2021 (see Exhibit 1), representing more than half of overall European fund flows. This trend is expected to continue going forward.

• Regulatory pressure expected to increase: EU regulatory bodies are expected to further detail the ESG disclosure requirements e.g. lined out by the SFDR (sustainable finance disclosure regulation). This will force fund managers to find solutions in order to check if they comply with the regulations in place.
• Push from retail investors: Sustainable funds are top-of-mind for European retail investors and, accordingly, asset and wealth managers are increasingly pushed to create suitable portfolios and to help retail investors make better sustainable investment choices.
• Well-established team: the founding team combines thorough tech experience (scaling teams at Spotify) and fund management (operations at EQT). They start their company at the ideal time benefitting both, from growing interest of retail clients in sustainable products, and growing regulatory complexity.

Team Datia, again welcome to the Nauta Family, we are excited to back you on this great journey!