Most asset managers and other financial firm executives are increasing their spending on ESG data collection this year, with some upping their investments as much as 50%, according to a recent Bloomberg survey.
The additional data is necessary for them to stay competitive in a market that increasingly values investing with environmental, social and governance issues taken into account, Bloomberg said.
Almost all of the financial firm executives surveyed said they need to spend more on ESG data either to stay competitive or to differentiate themselves from the competition, the survey said. Ninety-two percent of the 103 financial professionals surveyed said they plan to increase their ESG data collection spending by at least 10% this year, and 18% plan to increase their investments by 50% or more.
However, the firm executives also said they are having difficulty obtaining usable data because of the fragmentation among data collection agencies, which is holding them back for ESG investing.
The report is called “ESG Data Acquisition & Management Survey 2023.” Adox Research, a consulting and research firm, conducted the research with Bloomberg.
Nearly 30% of the portfolio managers, climate risk executives and data management executives surveyed said they felt their firms were somewhat behind the curve in managing ESG data, while more than 60% said they were ahead of the competition.
"Once categorized as an alternative data source, ESG data has quickly become integral to the value financial firms deliver to their clients,” said Leila Sadiq, global head of enterprise data content at Bloomberg, in a statement.
Almost all of the financial professionals surveyed said they understand the importance of adopting ESG investments and providing investors with data. Ninety-nine percent of the firms’ executives said their organizations value ESG data to keep pace with their peers and achieve a competitive advantage.
At the same time that ESG data is becoming more important, firms are trying to determine the best way to manage the data for clients, Bloomberg said. More than 70% of firms said they take an ad hoc or decentralized approach within their firms for acquiring and managing their ESG data and less than one-third said their firms take a firm-wide approach for evaluating, implementing and rationalizing their ESG data and investments.
“Given this fragmentation, the most challenging aspects of ESG data management are handling constantly evolving and new ESG data content and managing multiple ESG vendor data feeds,” Bloomberg said.
Since most firms “take an ad hoc approach to acquiring and managing ESG data, it is unsurprising the biggest data management challenges are evenly split between handling evolving data content, managing vendor data feeds and aligning ESG content to existing entity data,” the report said.
Fifty-five percent of respondents said obtaining and managing ESG data that is constantly evolving is a major challenge for them. Nearly half also said managing multiple ESG vendor data feeds is a problem.
“While firms are planning for ESG data to become a part of mainstream data and research workflows, they realize that the age of ESG data behaving the same as other financial data sets has not yet arrived,” said Gert Raeves, research director and founder of Adox Research, in a statement. “In the meantime, they are prioritizing technical scalability and data transparency to make sure analysts, investors and regulators have the right tools to select, curate and enrich existing datasets with key ESG attributes.”
Don Huff, global head of client services and operations at Bloomberg Data Management Services, added in a statement, “Our customers are grappling with the challenge of integrating large volumes of ESG data from multiple sources, and the lack of consistency between vendors can lead to data quality issues and operational disruptions.”
The survey can be found here.