Asset managers plan to increase their spending on environment, social and governance (ESG) data, but there are hurdles, according to a new Bloomberg and Adox Research survey.
The study, which polled over 100 portfolio managers, climate risk executives, and data management executives found that 92% expect to raise their ESG spending by at least 10%, with 18% planning a 50% or more rise.
The top areas being prioritised are ESG benchmarks and indices, company-reported data, ESG scores and sustainable debt.
Despite the additional expenditure, firms are grappling with the best way to manage it. Over 70% report taking an ad hoc or decentralised approach to acquiring and managing their ESG data.
Only about a third adopt a holistic firmwide approach for evaluating, implementing, and rationalising their ESG data.
Given this fragmentation, the study found that the key data management challenges are handling constantly evolving and new ESG data content, managing multiple ESG vendor data feeds and aligning ESG content to existing entity data.
In terms of selecting an ESG data provider, data quality ranked was the most important criteria followed by breadth of coverage.
The survey also highlights a stark contrast among firms in their perception of their ESG capabilities.
While 64% of respondents consider themselves ahead of the competition, nearly 30% acknowledge feeling somewhat or significantly behind.
All or 99% agree their organisations value ESG data. Forty-five percent cite its importance to keep pace with their peers while a similar number believe it helps achieve a competitive advantage.
Regulatory compliance was mentioned by just 10%
“Once categorised as an alternative data source, ESG data has quickly become integral to the value financial firms deliver to their clients, ” said Leila Sadiq, global head of enterprise data content at Bloomberg.
She added, “Executives are making significant strategic investments in ESG data acquisition and management to differentiate themselves and meet client and regulatory demand.”
In terms of technical delivery options for ESG data, cloud is the clear preference for 85% of respondents, followed by Rest API, 7%, SFTP/Parquet, 6% and SFTP/Request/Reply, 3%.
“While firms are planning for ESG data to become a part of mainstream data and research workflows, they realize that the age of ESG data behaving the same as other financial data sets has not yet arrived,” said Gert Raeves, research director and Founder of Adox Research.
He added, “In the meantime, they are prioritising technical scalability and data transparency to make sure analysts, investors, and regulators have the right tools to select, curate, and enrich existing datasets with key ESG attributes.”
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