Verdantix Forecasts A Climate Financial Data Market Worth $1.3 Billion In 2028 (With Conditions)

Verdantix Forecasts A Climate Financial Data Market Worth $1.3 Billion In 2028 (With Conditions)

Financial institutions are under increasing internal and external pressure to incorporate climate data and analytics into operations, products and disclosures. This growing demand has led to the development of specialized solutions, producing a distinct climate financial data and analytics market within the wider financial data space. In our 2023 market size and forecast report, Verdantix calculated the global climate financial data and analytics market to be worth $468 million in 2022 and forecast a CAGR of 19% until 2028.

The market is currently driven by a complex web of drivers with high regional heterogeneity, but is predominantly propelled by risk and regulation. For example, as of January 2023, the Sustainable Finance Disclosure Regulation (SFDR) in Europe required firms to report on adverse sustainability impacts at a fund level. Within Europe, climate stress testing is also increasing in stringency; the European Central Bank noted that initial compliance with mandatory climate stress testing was inadequate, with 96% of banks retaining blind spots in risk identification. Banks now have until the end of 2024 to fully align with supervisory expectations.

However, market growth and solution adoption are fraught with challenges. The product market is yet to be meaningfully regulated, creating distrust due to a lack of transparency and standardization. Trends in green finance were also reversed in 2022 as products were disproportionately affected by macroeconomic factors and geopolitical events. Green funds underperformed compared with traditional funds for the first time since 2018. Moreover, green finance has become highly politicized in the US. Given the proximity of the US national election – as well as numerous others in 2024 – this presents an uncertain trajectory for the climate financial data and analytics market.

Despite this short-term uncertainty, Verdantix expects greater stability in the long term. By 2028, the market will grow to more than $1.3 billion. Nascent regulation of the product market, such as the EU’s recent decision to bring ESG ratings providers within the remit of the European Securities and Markets Authority, as well as national initiatives to standardize data provider offerings, will create a stable foundation for market growth and product development. Additionally, government and industry alliance projects to structure and support green finance in growing economies such as Asia will generate regional demand and provide opportunities for geographical solution expansion.

Later in 2024, Verdantix will benchmark the foremost providers of climate financial data and analytics in a Green Quadrant analysis, building on the research we conducted on this space in 2023.