Sustainability Update

Lack of Good Quality ESG Data a Challenge

The financial industry is paying increasing attention to published Environmental, Social and Governance (ESG) data, driven by regulatory requirements and investor demand.

Unfortunately, there is a lack of corporate disclosures around sustainability which means they then have to seek out data and face the challenge of inconsistent data.

Research by Alveo, a data management provider, found 71% of companies were using more than five data sources. This makes comparisons hard since the underlying methodologies differ so much.

The research commented that using ratings services does help manage the shortfall in information but creates other issues of data management.

The European Union introduced the Sustainable Finance Disclosure Regulation (SFDR) in March 2021 in an attempt to ensure the sustainable investment market was based on sound data, as opposed to ‘greenwashing’. A second level of SFDR measures comes into effect in January 2023 requiring more disclosures from companies relating to their principle adverse impacts. Unfortunately, there is little international harmony relating to disclosures around the world.