As stakeholders demand greater transparency on sustainability performance, financial institutions and consulting firms need a clear view of how companies measure up on ESG metrics. Robust benchmarking is no longer a “nice to have” — it’s essential for identifying leaders and laggards, assessing risk, and uncovering new opportunities.
ESG benchmarking enables firms to compare performance across sectors and markets, spot emerging sustainability trends, and provide clients or investors with insights that inform high-impact, data-driven strategies.
In this article, we examine ESG benchmarking in detail: what it is, why it matters for financial and advisory decision-making, the challenges to watch for, and the key components that ensure accurate, actionable results.
What is ESG benchmarking?
ESG benchmarking is the practice of evaluating an organization’s environmental, social, and governance performance against peers, industry standards, or internal frameworks. For financial institutions and advisory firms, it is a strategic tool that highlights sectoral or regional performance trends, identifies gaps, and informs recommendations that can improve sustainability outcomes.
By comparing organizations across ESG dimensions, advisors and investors can make more informed decisions, mitigate risks, and guide clients or portfolio companies toward strategies that drive long-term value.
Why is ESG benchmarking important?
ESG benchmarking has become essential due to growing regulatory pressure and stakeholder scrutiny. Governments, regulators, and investors are demanding transparency in sustainability disclosures, making it critical for firms to understand how their clients or portfolio companies perform relative to peers.
For instance, 85% of chief investment officers now report incorporating ESG factors into investment evaluations. In advisory contexts, firms rely on ESG benchmarking to provide actionable recommendations that reflect the real-world sustainability landscape of industries and regions.
Benefits of ESG benchmarking
ESG benchmarking delivers several strategic advantages for financial institutions and consulting firms:
1. Data-driven decision-making: Benchmarking provides actionable insights into ESG gaps and opportunities, enabling advisors to make recommendations grounded in evidence rather than assumptions.
2. Risk management: Comparing ESG performance uncovers environmental, social, or governance risks that could impact financial performance or client reputation. Firms can use these insights to mitigate regulatory, operational, or reputational risks.
3. Stakeholder confidence: Transparent benchmarking builds trust with investors, clients, and employees, demonstrating a firm’s commitment to sustainability.
4. Continuous improvement: Establishing performance baselines allows advisory teams to measure the impact of their recommendations over time and track progress on sustainability initiatives.
Common challenges in ESG benchmarking
Despite its value, ESG benchmarking is not without hurdles. Key challenges include:
Varying disclosure standards across regions
Organizations operating across multiple jurisdictions face differing reporting requirements. For example, EU companies must comply with the Corporate Sustainability Reporting Directive (CSRD), while U.S.-based organizations may follow state-specific regulations like California’s SB 261. These discrepancies complicate cross-regional comparisons and make it challenging to provide consistent advisory insights.
Limited access to credible, up-to-date data
Reliable ESG data is still a major bottleneck. Many companies underreport or inconsistently update their disclosures, particularly in regions with less stringent oversight. For advisors and investors, this can undermine confidence in benchmarking outcomes.
Time-consuming manual processes
Even as AI becomes more common in ESG reporting, many firms still rely on spreadsheets and manual data aggregation. These processes are slow, prone to error, and labor-intensive, especially when comparing companies across sectors or frameworks.
Key components of effective ESG benchmarking
ESG benchmarking is a structured process with multiple components, all essential for an accurate, comprehensive picture of target companies’ ESG performance. Start with:
1. Stakeholder engagement and materiality assessment
Start by identifying which ESG factors are most relevant to your clients or portfolio companies. Engage internal stakeholders (executives, investment committees) and external stakeholders (clients, regulators, communities) to understand material concerns. Prioritizing issues like climate risk, supply chain transparency, or labor practices ensures your benchmarking is focused and actionable.
2. Data collection
Gather ESG data from internal reports, public disclosures, and third-party databases. Reliable benchmarking depends on data that is accurate, complete, verifiable, and comparable. Using tools like Manifest Climate can help automate data sourcing and validation.
3. Peer and standards selection
Benchmarking is only meaningful when comparisons are relevant. Compare organizations by sector, size, and jurisdiction, and align metrics with widely adopted ESG frameworks such as ISSB, TCFD, or proprietary internal models. This ensures insights are actionable and credible.
4. Benchmarking assessment
Analyze how target companies perform relative to peers. Identify strengths, weaknesses, and alignment with industry trends. Tools like Manifest Climate can surface material differences and best practices, saving time and improving the accuracy of assessments.
5. Prioritizing areas of improvement
Insights are only valuable if they lead to action. Use benchmarking results to recommend targeted interventions, whether reducing greenhouse gas emissions, improving diversity and inclusion, or enhancing governance practices.
6. Monitoring and reporting
ESG benchmarking is an ongoing process. Regularly update comparisons and communicate results to clients or internal stakeholders to maintain accountability, demonstrate progress, and adapt strategies to evolving market conditions.
7. Continuous improvement
Leverage benchmarking insights to refine investment strategies, advisory recommendations, and operational decisions over time. Continuous iteration ensures firms stay ahead of regulatory changes, market trends, and stakeholder expectations.
How can organizations improve their ESG benchmarking processes?
One of the best ways to streamline your efforts is to move away from manual processes and adopt an AI-powered benchmarking tool like Manifest Climate. These tools handle the bulk of the benchmarking process, automating everything from data collection to benchmarking assessment and insight generation.
Manifest Climate, for example, gathers data from public and private documents, uses AI to analyze and create comparability between companies, and presents it in an easy-to-read interface, saving your team hours of manual work.
How Manifest Climate simplifies ESG benchmarking
Manifest Climate’s AI-driven platform automates ESG benchmarking, delivering reliable insights across +1,200 datapoints. It allows teams to:
- Benchmark performance across sectors, peers, and regions
- Compare historical disclosures to track ESG progress over time
- Identify gaps and best practices for actionable recommendations
- Save hours of manual work through automated data collection and analysis
By providing a centralized, intuitive interface, Manifest Climate turns ESG benchmarking from a burdensome, time-consuming exercise into a strategic tool for driving client impact, investment decisions, and operational improvements.
Elevate your ESG benchmarking process today
Manifest Climate helps consulting firms and financial institutions transform ESG data into actionable insights.
Schedule a demo to see how our AI-powered platform can streamline benchmarking and enhance sustainability outcomes for clients and portfolios.
