Huge steps have been made in recent years to bring environmental, social and governance (ESG) reporting standards up to the level of reported financial information – but there is still a long way to go. A shortage of company data, a lack of harmonisation on standards, and the sheer volume of data being pumped out by data vendors are among the key challenges facing the industry as regulators get to grips with overseeing the ESG space.
These are just a few of the pressing issues that will be discussed at next week’s A-Team Group webinar, ‘Sourcing and Managing ESG Disclosure Data to Ensure Compliance’. The speakers will be Martina Macpherson, head of ESG strategy and general management committee member at ODDO BHF Asset Management & Private Assets; Phil Davis, director of ESG, Helios Investment Partners; and Elisabeth Seep, head of ESG product management at RIMES Technologies.
We caught up with some of the speakers to get a flavour of their views on managing ESG disclosure data ahead of the webinar.
“It’s still the Wild West in ESG, where you can have very different types of analysis, very different methodologies, very different approaches,” says Seep. “Some collect data from companies directly, some use machine learning and alternative data to scrape data sets, so you’re getting very different source data. And that’s a challenge.”
Macpherson argues that one of the biggest challenges is getting ESG data reported in the first place. Not only are corporates insufficiently set up to provide the information, the lack of a standardised language on how to report on ESG makes it difficult for even the most willing companies to comply.
“You have the challenge that information on sustainability and climate risks is only provided annually. It is often out of date by the time it actually ends up in ESG research and rating agencies on the one hand and investment managers, NGOs and other information users on the other,” she says.
A competing range of ESG reporting standards, methodologies, materiality frameworks and taxonomies may be holding back efforts to encourage firms to report their sustainability data accurately and help asset managers better serve the demands of their clients. The result, says Macpherson, is what a study by MIT Sloan Business School called ‘aggregate confusion’ – too much noise and misaligned ESG ratings that can be baffling and misleading for investors.
“We have to be very careful now – and this is something that many investors and corporations see – that we are not multiplying reporting fatigue, and again creating additional layers of aggregate confusion,” Macpherson warns. “Not only at the level of when and where company information is reported and aggregated, but also how investors are interpreting the information.”
Both speakers are, nevertheless, optimistic that the industry is on the right path. Register here for next week’s webinar to find out more about the challenges and opportunities of sourcing and managing ESG disclosure data to ensure compliance.
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