Robust ESG data needed

The lack of robust data is the most influential barrier for institutional investors to further incorporate environmental, social, and governance (ESG) into investment decision making, according to BNP Paribas Securities Services.

BNP Paribas Securities Services’ ‘Great Expectations: ESG – What’s Next for Asset Owners and Managers’ report found that less than half (38 per cent) of institutional investors in Australia felt they could take external ESG data and incorporate it into existing risk and performance.

BNP Paribas Securities Services head of investment analytics for APAC, Madhu Gayer, said: “This shortage of data to support ESG investments has led some senior management ranks to be more sceptical, which has in turn limited adoption across the Asia-Pacific region, and globally more generally”.

“However, smart data, artificial intelligence and ESG specialists such as BNP Paribas will play a crucial role in helping to break down these barriers in the next few years,” he said.

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The report found that 73 per cent of Australian-based institutional investors surveyed incorporated ESG, behind the rest of Asia-Pacific (84 per cent), but ahead of North America (70 per cent).

The firm’s head of Australia and New Zealand, David Braga, said access to analytical tools and ESG specialists would prove pivotal to further uptake in coming years.

The report surveyed more than 460 institutional investors and asset managers and found that 38 per cent felt environmental considerations was the most important factor, compared with corporate governance and social concerns, both at 31 per cent.

A further 53 per cent felt the social factor was the most difficult to assess and incorporate.

“An interesting conclusion from the research is that Asia-Pacific has learned from the experience of more developed markets and is placing more emphasis on ESG in the early stages of market developments, which can only be a good thing,” Gayer said.

“From the survey we see that investors in this region are looking closely at ESG from an expertise and resources perspective, investment allocation, board oversight and from a regulatory risk point of view.”