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ESG data quality a major concern for investors

Finding reliable data continues to be a major issue for responsible investors, according to the ESG Global Survey 2023, published by BNP Paribas.

In the report, incomplete and inconsistent data and research was cited by almost three-quarters (71%) of investors as the most-significant barrier to ESG investing. The biggest data challenges for those investors, the report elaborated, was the poor quality of analytics, followed by costs and inconsistency among the different data vendors.

BNP Paribas noted that comparing the responses with the same question in recent years indicated this to be a problem growing in prominence. Data was cited as a problem by 55% in 2017, 32% in 2019, and 54% in 2021. “The need for timely and reliable ESG investing data has increased since 2017 for a number of reasons,” said the report’s authors.

“One is the increased emphasis on tackling climate change by many institutional investors, through decarbonising portfolios and engaging with investee companies, particularly with heavy emitters of greenhouse gases, to push for positive changes. And new regulatory requirements, such as the European Union’s Sustainable Finance Disclosure Regulation, require greater transparency on the disclosure of information related to sustainability.”

A further driver for more and better ESG data, the report added, was “the growing use of impact investing, where investors seek to make a measurable, positive contribution to their ESG goals”. There was little differentiation between nations, with 72% of investors in North America naming data as the most-fundamental problem, followed by 70% in Europe. That number edged up to 73% in the APAC region.

Layers of complexity

The report also highlighted how the rise of ESG investing had added further layers of complexity to the use of data by investors. “Increasingly, investors using ESG investing strategies want data that is forward-looking and covers emerging topics and approaches, such as decarbonisation, biodiversity or impact investing,” it explained. “ESG investing data can be quite different to the traditional data tools used to assess assets, as it may involve more subjective judgements or data, which is hard to find and record.

“As a result, the lack of reliable and accurate data is often cited as a hindrance for ESG investing. To address these ESG data challenges, investors must find ways to cope with poor quality, incomplete or inconsistent data, including internal data-management techniques and working with others to improve the quality of data available to them.”

Pete Carvill

Pete Carvill is a reporter, writer, and editor based in Berlin who has been writing for the B2B and mainstream media since 2007. He is a contributing writer for Expert Investor and, in addition, has...

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