Data science making the difference in ESG

Delegates at Columbia Threadneedle event told how big data is giving ESG a new dimension

Fund managers able to harness the power of big data – and crucially analyse it before their competitors – will take a leading edge on investing through an environmental, social and government lens, according to experts.

At a panel debate, hosted by Columbia Threadneedle Investments in London on Monday (25 March 2019), experts explained how using new types of large amounts of data was already setting some managers apart.

Emma Hunt, head of responsible investment at St James Place, explained to delegates how data providers were now able to use satellite technology to pinpoint when all of China’s power stations were running.

“It is a proxy for actual GDP,” said Hunt. “Is it accurate? It does not matter. It might be a window – it gives people [an extra] data point and could give them the edge.”

Ajeet Manjreker, co-head of solutions at River and Mercantile Solutions, said using data science was speeding up the process of analysing large amounts of information, meaning it could be used more easily and efficiently.

While some managers use it to gain a pure alpha edge, others are using it to get outperformance by focusing on the ESG factor, Manjreker said.

However, it is important for investors to find out whether, and to what extent, a data science function is fully integrated into fund manager’s process, the panel agreed.

Manjreker said: “Everyone says they are using ESG… but there is a lot of box ticking going on.”

Hunt said the journey towards full integration of data science – from accessing the data, processing it and using in making better investment decisions – could take up to seven years.

Manjreker said: “There is a lot more ESG data to find and there is a lot of journey to go.”