Investors thirst for ESG data

Almost half of the surveyed global investors identified the lack of robust ESG data as the biggest barrier to ESG adoption.

The paucity of data is preventing investors from fully integrating ESG factors into their investment decision, according to a survey of 1,000 global investors by Capital Group.

As much as 49% of them complained of a lack of data, while 27% ranked “assessing ESG data” as the top challenge.

“While investors appreciate the importance of ESG integration – and qualitative analysis and engagement by active fund managers – they also report that the lack of robust and consistent data is the main challenge when investing in ESG,” said Jessica Ground, Capital Group’s global head of ESG.

“It’s understandable that as ESG becomes more important to these investors, the desire to be rigorous in their assessment of ESG grows.”

Capital Group surveyed over institutional and wholesale investors across 16 countries in June. They include pension funds, family offices and insurance companies, as well as fund of funds, retail/private banks and financial advisors. Among these investors, 29%, or 300 of them, are based in Asia Pacific.

As investors increasingly look for more information about sustainability, they also have a rising reliance on multiple data providers. More than half (53%) of investors now use two to five providers compared with 22% of investors two to three years ago.

In the next couple of years, the number of investors who will use at least six providers is expected to more than double to 28% from 11% currently.

The survey also found that specialist data and research providers, such as climate, environment, and green bonds specialists, are gaining popularity over generalists.

Apart from looking for more specific information, investors are also shifting away from a reliance on outsourced ESG resources and toward in-house expertise.

The reliance on outsourced ESG resources is expected to decline to 47% in the next two to three years from 57% two to three years ago, according to the survey. “These findings suggest investors want to develop and customise their own ESG resources so their investments can have a more targeted impact,” said Capital Group.