Just how bad is the issue of redundancies/departures across ESG research and climate data?

I pull together a time-line of staffing numbers across the sector for a top-down analysis of the market.

When I started this Substack, I never expected to be writing an initial series of articles on ESG/climate research/data firms, nor, sadly, a wave of redundancies and/or departures.

I knew things weren’t good in the research/data market: you hear a lot of grumbles as a journalist…

But sometimes a gut instinct and some good contacts (my thanks to them) send you down the rabbit hole at the right time.

There’s been a huge amount of interest in the articles. Sustainable/climate finance research has become a big market; almost certainly too big, too quickly, without the necessary economic/policy underpinning. 

My initial sense was that broad ESG data/research was in commercial trouble as a result of the ESG pushback and regulatory developments (more to come on why in another piece), but that climate data and compliance/reporting data looked in better shape. 

On investigation, I think the latter statement is not wholly true either. 

In short, I think this is a necessary correction; albeit a painful one for some people that have been developing a career in the field. 

I want to dig into that downturn a bit more in this piece, before looking at the reasons for it in a later article. 

I decided to take a look at staffing numbers over the last couple of years at ESG/climate data/research firms using Linked-In data. 

I’ll get my caveats in first.

I’m happy to amend any data that isn’t quite correct.

In addition, it’s not always easy to differentiate an ESG data firm from a climate data firm from a regulatory data firm. Many do a bit of everything. I’ll try and do so when it’s clear.

Furthermore, ESG subsidiaries of big conglomerates often can’t be assessed separately for staff numbers, so it’s difficult to get fair ‘market’ coverage from Linked-In. Some companies are also new, so data is limited. The number of market players has also grown rapidly in the last few years.

Finally, staff numbers are not a proxy for how well a company is doing; there are many reasons why companies hire and let staff go. Staff reductions, or additions, at the companies researched here are not an indication of financial health or business growth. 

That said, I think the staff numbers collated here are likely to be an underestimate as people often don’t take job titles off Linked-In until they’ve secured another post and can then get busy with the humblebrag…honoured to join, etc, etc. (I’m not judging, we’ve all done it ;0)

Given all the above caveats, however, I think the numbers are credible, and tell some interesting stories; after all, companies are often quick to let the market know when they are adding staff… 

Let’s take a look first at Morningstar Sustainalytics, which surprised many in September last year saying that it was laying off 10% of its global headcount.

The Linked-In data shows that 10% number is likely conservative in terms of overall departures in the last 2 years. 

In June 2022, Morningstar Sustainalytics had 1,324 employees, peaking at 1,447 in June 2023, then dropping to 1124 by June, 2024; that’s a 22% drop in 1 year and 15% over two years.

Morningstar Sustainalytics employee numbers

Morningstar did not return requests for comment by the time of publication.

What may be interesting here are the Morningstar acquisition terms of Sustainalytics back in 2020 when it filled out its previously 40% ownership stake, acquired in 2017, to buy the remaining 60% for a cash payment of approximately €55 million and further cash in 2021 and 2022 based on revenue, estimating the total value of the business at €170 million. The additional payments will likely have been high by 2022 before Morningstar started to see some revenue pressure in 2023, hence perhaps the staff reductions.

Another interesting company that has raised $150m in investor capital since it kicked off at the turn of the decade is Persefoni, the Tempe, Arizona based climate management and accounting tech platform. The firm has taken on some top former SEC staff. Its board includes Allison Herren Lee, Former SEC Acting Chair & Sustainability Advisory Board Member. Emily Pierce, former Assistant Director, International Affairs at the SEC is its Associate General Counsel and VP of Global Regulatory Climate Disclosure.

By June 2022, it had raced to 309 employees, peaking at 320 in December that year.

Since then, staffing numbers have been pared back considerably to 175 employees in June 2024, down by 43% over 2 years, and by 41% in just the last year. 

Persefoni employee numbers

Some senior staff at Persefoni were among several departures earlier this year. They included Greg Buxkemper, Chief Technology Officer and Chief Information Security Officer, and Page Insalaco, Chief Accounting Officer, who both left in February. Derrico Smith, Senior Vice President of Customer Experience left in April, and Jason Suss, Vice President of Software Innovation, left last month.

A Persefoni spokesperson said: “We are an enterprise software company. We continuously evolve our business to meet our customers’ priorities and the significant opportunities ahead. We maintain our commitment to investing in areas that are critical to our business and ensure our long-term success."

Manifest Climate in Toronto, Canada, the climate risk reporting firm, is another successful fundraiser that took in $30m in Series A investor capital back in early 2022, after seed funding of $6.5M the year before. The fundraising helped push employee numbers up to 65 in June of that year, peaking at 68. It is now down to 48 employees, a fall of 26% over two years.

Manifest Climate employee numbers

I can reveal that the company also let go of a significant number of people in its sales team last week, and some product/tech team staff have recently departed. Manifest Climate says the staff are being replaced by AI/tech solutions. 

I can also reveal that it has hired Jim Macdonald, a SAAS (software-as-a-service) specialist as CEO, and switched the roles of Laura Zizzo, co-founder and CEO to Chief Strategy Officer and that of Jeremy Greven, co-founder and president to Chief Technology Officer. 

Laura Zizzo at Manifest Climate, said: “We can confirm that we had a larger staff after raising our Series A than we do today, as we were building our technology and still operating a significant consulting practice. As we've shifted to a pure AI-driven climate intelligence software platform, we have made efficiencies as would be expected from this transition. Our recent restructuring is another stage of our growth common to many start-ups. We have brought in an operationally experienced CEO and I will continue at the executive level focused on strategy and vision of the company.” 

It’s far from staff reductions only though among ESG/climate research/data firms. Many continue to add personnel, at least until recently.

ISS ESG (part of ISS, which is majority owned by the Deutsche Börse Group) had 356 staff in June 2022, and 392 in June 2024, a rise of 10%.

EthiFinance, the French ESG research firm, now majority-owned by Andromède, the family office of the Remy Cointreau French spirits group, had 117 staff in June 22, up 18% to 138 by June 24, boosted by its buy-out last year of Germany’s, imug rating, amongst other acquisitions.

Ecovadis in France has also gone from 1,191 > 1,678, a rise of 41% in two years.

RepRisk, the Zurich based ESG data tech firm, had 272 employees in June 2022, and now has 376, up 38% in 2 years.

Clarity AI, the New York headquartered sustainability tech firm, which also raised a further $50m in August 2021 from investors including SoftBank Vision Fund 2, had 258 employees in June 22, and now has 363, a rise of 48% over 2 years.

In my last piece I said that ESG Book had lost a number of senior staff and had yet to turn a profit according to its latest reported numbers, although the company says it is growing. It continues to add staff, up from 152 in June 2022 to 200 in June 2024, a rise of 32% over 2 years, and last week named a new CEO, Justin Fitzpatrick, a fin-tech specialist, to replace departed CEO, Daniel Klier. 

It will be fascinating to see if some of the ESG/climate research/data firms will have to raise further capital to maintain growth in competitive markets, or if staff levels will start to fall more broadly across the sector, mirroring redundancies at some of the bigger research players such as MSCI, Morningstar Sustainalytics and Moody’s ESG Solutions.

I think further growth in staff numbers across the ESG/climate research/data sector in the short to medium term will be limited.

But, while I think the ESG/climate research/data market is currently in trouble, I’m not overly pessimistic for the mid- to longer-term. However, I think a radical shift in the value of ESG research is required, alongside far more attention on pushing for policy and price signals that would underpin better research.

More of that next time. 

Other ESG firm staffing numbers

Verisk Maplecroft: 115 (June 2022), 143 (June 2024) (+24%)

GRESB: 86 > 113  (+55%)

Climate X: 29 > 59  (+103%)

Impact Cubed: 22 > 37 (+68%)