Connect Earth’s Datia Acquisition Is Promising for Sustainable Finance

UK-based climate fintech Connect Earth recently announced its acquisition of Datia, a Swedish firm that provides a regulatory reporting and ESG analysis platform for asset managers. The acquisition aims to unify transaction-level emissions data to make it ready for ESG reporting in line with EU and UK rules.

The acquisition is a promising development. Financial institutions face mounting pressure to report on their environmental, social, and governance impacts, with the European Union enforcing some of the strictest rules—like the Sustainable Finance Disclosure Regulation (SFDR), the Corporate Sustainability Reporting Directive (CSRD), and the EU taxonomy for sustainable activities.

Despite this, achieving compliance is a costly process due to the often-fragmented data environment in many established financial services organizations. In particular, leaders face the challenge of pulling data from a multitude of systems, reconciling inconsistent frameworks, and engaging stakeholders on sustainability goals.

The Rise of ESG-as-a-Service

The Connect Earth-Datia deal reflects the broader trend of fintechs offering ‘ESG as a service’, where sustainability data is accessible to consumers, investors, and institutions. While Connect Earth has the API-driven tools to measure carbon emissions associated with financial transactions, Datia provides the analytics and reporting tools. The hope is this will provide a one-stop shop to reduce duplication, improve data accuracy, and encourage the development of financial products that reward sustainable behavior. It also positions Connect Earth as a potential partner for banks in both the UK and the EU seeking to offer green-lending programs or to meet obligations under the EU taxonomy.

The need for consolidation in all areas of data management is an overarching challenge across the technology industry, and ESG data is no exception. In the context of ESG, many startups have created niche solutions for operations like carbon accounting, regulatory reporting, or client engagement, but financial services organizations are increasingly prioritizing integrated platforms as regulations tighten and complexity increases.

However, challenges remain. Data quality and comparability across jurisdictions continue to frustrate ESG reporting, putting fintechs offering ESG solutions under ever-greater pressure to align with new and emerging standards and regulations, such as combatting greenwashing. ESG-focused fintechs also face the challenge of scaling across very different regulatory regimes, even within Europe itself and, potentially, the US, where ESG regulation remains highly fragmented. Despite these hurdles, it’s clear from acquisitions like these that sustainable finance is becoming integral to the financial ecosystem.