Inconsistent data continues to be the greatest data challenge in ESG and sustainable finance in Asia, according to 56% of respondents who responded to a poll conducted by Asifma and the Future and Sustainable Data Alliance (Fosda).
A report co-published by both associations said that data is inconsistent as there is no standardisation to measuring E, S and G factors. In addition, individual ESG metrics vary not only between industries and markets, but also between firms in the same industry, with the quality of company disclosures differing widely.
“Firms and investors are also navigating a confusing landscape of disclosure frameworks, incentive structures, data collection methods and assessment in various markets and jurisdictions by both the public and private sectors,” Matthew Chan, head of policy and regulatory affairs at Asifma, said in the report.
“There is also no single binding global taxonomy, with classification systems for ‘green’ assets or products differing widely across jurisdictions and industries.
“The industry wants to see greater harmonisation with a consistent principles-based approach that allows tailoring to each region’s specific conditions, including different levels of economic development, and which recognizes transitional activities and investments,” he added.
In the same poll, a further 35% of respondents cited ‘poor quality data’ as the greatest data challenge in ESG and sustainable finance. While there are many “quality third party providers”, reliance on a single data source can result in volatile indicators over time, and there are concerns regarding compatibility between vendors’ methodologies, as well as transparency regarding some methodologies, according to the report. In some cases, there are also concerns about the quality of the data provided itself.