About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Clamour for ESG Data Makes Good Management Crucial

Subscribe to our newsletter

ESG data is now core to banks’ and financial institutions’ operations, their compliance and risk processes and the products they offer investors. For that reason, it’s crucial that this data be managed properly and treated in the same way as other datasets.

Without good data management, banks can be left commercially and legally exposed, vulnerable to regulatory censure and competitively disadvantaged. It will also hamper their operations by making data distribution and access difficult.

The growing importance of good management of ESG data was highlighted in A-Team ESG Insight’s latest webinar, in which leading market participants explained how banks were being forced to get this right to meet the stringent demands of sustainable finance investors and regulators who are determined to provide a level playing field for them.

The rise of the informed investor was the most important driver of growth in the ESG space, argued Ben Corris, head of ESG models at Schroders. Corris told the Keys to ESG Data Management Success webinar that asset managers would be failing their clients and markets if they didn’t respond to the growing clamour for sustainable products and services.

Rinesh Patel, global head of financial services at cloud-focused data technology company Snowflake, agreed that investor demand was fuelling the industry and that regulators’ responses were adding impetus. Patel said that purpose and ethical standards were now important to inventors who increasingly want to bring change for good through their investments.

Into Action

To put investor intentions into concrete action, however, requires financial institutions to use good quality ESG data. It also requires they effectively incorporate that data into their operations, their investor research models, risk management strategies and compliance processes. This is not an easy task, the speakers said.

For a start, ESG data quality is, in most cases, a trailing a long way behind that of other datasets used by banks. Matthew Mernagh, head of ESG data at Deutsche Bank, began a lengthy debate on the challenges to obtaining the right data in the first place. While improvements had been made among corporate entities to better report their ESG performance, there are still many gaps in the data record that banks must fill, usually through the use of proxies and estimates.

Remediating that is made no easier by the patchiness of coverage by individual data vendors, the panel agreed. With no single company able to provide all the data needed to take a panoramic view of a topic as broad as ESG, banks must engage with a multitude of vendors. This brings with it a host of other challenges, both financial and operational.

Licensing Issues

For instance, Mernagh said that data licensing agreements varied with vendors and can have an impact on which teams and individuals within an organisation are able to access it. That requires banks to embark on an in-depth examination of exactly what data they need, how they will use it and who can provide it – neither of which are quick or cheap to execute.

Patel pointed to the difficulty in blending datasets provided by different vendors who sell content in a variety of forms. To overcome the deficiencies of this fragmentation, banks must pay additional attention to other data quality attributes, such as lineage, he added.

The data vendor community, said Mernagh, is struggling to keep pace with demand for good-quality ESG data and as a result, data consumers are having to carry out a lot of costly manual cleansing and normalising work before ingesting it into their systems.

Oversight Challenges

The changing demands of regulators are adding another layer of complexity to the ESG data management question. With oversight rules regularly updated and a lack of joined-up thinking across jurisdictions, financial institutions face difficulties in knowing what data to ingest and for what use.

Corris, for instance, highlighted how European regulations’ “sequencing is out of order”, with overseers demanding data from asset managers that can only be obtained from corporates who, conversely, are under so such obligation.

The fragmented global regulatory landscape is also a worry, he said, but was hopeful that the fact overseers were so active was a sign that greater transparency into corporate ESG performance is on its way.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Managing data governance for ESG

Volumes of ESG data continue to rise, standards and metrics are emerging, and financial institutions must manoeuvre through the maze to source, manage and make best use of ESG data to meet increasing client demand for sustainable investment. They must also adhere to emerging regulations, avoid greenwashing, and integrate ESG data – both structured and...

BLOG

Good Governance the Best Foundation for a Strong ESG Strategy, Webinar Told

Data is essential for financial institutions seeking to demonstrate to investors, customers and regulators that they are behaving sustainably. But that can’t happen until the data is properly managed and governed, a panel of experts told an A-Team ESG Insight webinar. While there are challenges to getting that right, it’s essential that firms pay special attention to...

EVENT

Data Management Summit London

Now in its 12th year, the Data Management Summit (DMS) in London brings together the European capital markets enterprise data management community, to explore the evolution of data strategy and how to leverage data to drive compliance and business insight.

GUIDE

The Trading Regulations Handbook

Need to know all the essentials about the regulations impacting trading infrastructure? Welcome to the first edition of our A-Team Trading Regulations Handbook which provides all the essentials about regulations impacting trading operations, data and technology. A-Team’s Trading Regulations Handbook is a great way to see at-a-glance: All the regulations that are impacting trading technology...