Asset managers and wealth managers have divergent data needs for ESG investing, a new survey suggests.
While asset managers want access to better and more varied granular data, their wealth-focused counterparts prefer packaged ratings, the survey by Swiss financial services company SIX found. At the same time, both expressed frustration at the shortage of information as their investor clients demand greater focus on sustainability.
The findings highlight the growing importance and complexity of the ESG data space as mounting evidence of the negative impacts of climate change and social divisions pushes sustainability further into the investment mainstream. Growing appetite for sustainable assets is expected to see about US$50 trillion allocated to ESG-linked assets by the end of the decade, roughly a third of all invested capital.
SIX’s survey of 143 buy-side C-suite executives found that most asset managers said the biggest constraint to their ESG strategies was a shortage of raw and underlying ESG datasets that they could incorporate into their own investment models. Respondents said they wanted the data to make their own assessments of what is best for them, a report on the survey stated.
However, 45 per cent of wealth managers said they prefer ratings that have been prepared for them. A quarter also said that the services they most want to help drive their business forward is data and analytics, and advanced quantitative skills.
“A lack of data expertise from wealth managers could be why they prefer fundamental ESG ratings to raw ESG datasets – to limit the amount of analysis that they need to do,” the report stated.
Closer Watch
ESG data provisions are coming under scrutiny as investors increase demands for clean and accurate sustainability disclosures amid rising pressure from regulators and growing criticism over greenwashing. A number of recent reports indicate asset managers and owners are struggling to satisfy their ESG strategy needs with available data and technology needed to process and analyse it.
Recent reports by EY, Russell Investments and Clarity AI said that long-standing challenges, such as gaps in the ESG data records, remain an irritant. At the same time, data quality and trust issues are beginning to weigh on their minds.
“There are data and technology challenges that act as potential barriers to entry when attempting to pursue ESG investing strategies,” Gayatri Raman, president in Europe and Asia for Clearwater Analytics, told ESG Insight. “Firms need to be able to rely on transparent, accurate ESG ratings, which ultimately comes back to the information that sits underneath.
“ESG data needs to be easily available and of high quality – but crucially firms need to have technological capabilities to both account for this information and report it in a clear way to investors and regulators alike.”
The SIX survey found unanimity among asset and wealth managers on the challenges of data accessibility and the suitability of available technology to manage and process it.
More than a third of cited these as handicaps to formulating investment strategies and two-fifths said they needed more support in automating regulatory compliance with ESG regulations.
The survey found they were also agreed on the importance of ESG, with 41 per cent saying that developing appropriate analytical capabilities was “important” or “critical” to the running of their business. Only 15 per cent said it was not important.
“Different market participants have different needs when it comes to ESG data,” said Marion Leslie, head of financial information and member of the executive board of SIX. “What they have in common is a need for standardized, reliable, comprehensive and accessible data.”
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