This generates debates and questions around sustainable investing. What counts as valid ESG data? How can ESG claims be assessed across asset classes and business types? What is the true picture of ESG business impacts right through extended supply chains? In the absence of data that is verifiable, consistent and comparable, investors need access to tools and platforms that enable them to easily access relevant data from multiple sources and integrate this into their decision-making processes.
And that means that for many investors and the institutions that serve them the data challenge comes down to a simple question: whether to build ESG analytic capacity, or buy it? The selfbuild option can be attractive in terms of maintaining ownership of insights and supporting data, but it calls for extensive human and data resources that might be better directed elsewhere. The buy-in option is likely to be simpler, but it is costly and it generates counterparty risk.
The ‘buy or build’ question is a classic corporate dilemma – but we believe it may be the wrong question here. Most if not all of the data that investors need is accessible: what is lacking is integration and analytic power. There is a strong case for investors to move to a platform solution, such as ours which unifies multiple ESG data sources on a mix-and-match model, that will preserve the upside of both ‘build’ and ‘buy’ but eliminate the downsides of cost and risk.
We know from the BNP Paribas ESG Global Survey 2021 that there is a strong need for a richer and broader ESG data solution. This latest iteration of our survey shows that for banks, investors and financial traders, ESG has moved firmly into the mainstream, and the need for data that is credible, detailed and transparent is widely recognised.
For example, in our 2019 survey, not a single respondent expected that 75 per cent or more of any portfolio would incorporate ESG by 2021. Yet in this year’s survey, 22 per cent of investors said their portfolios are now at this level, with 34 per cent expecting portfolios to be more than 75 per cent integrated by 2023 .
This upward trend is supported by external data: by late 2021 the Net Zero Asset Managers Initiative, which supports a goal of net zero by 2050 or sooner, had attracted 220 signatories accounting for more than USD 57 trillion of assets under management . That is more than half the global managed asset pool.
Our survey also highlighted that there is much still to be done. A significant portion of respondents still incorporate ESG into less than half of their portfolio, and common challenges around data continue to impede wider integration.
Despite this mainstreaming of ESG, there remains little in the way of standardised frameworks that allow investors to make robust comparisons of ESG performance across assets, industries and geographies. Many critical disclosures – especially corporate ones – are discretionary and often unsupported by rigorous data, and while ESG rating frameworks for equities are developing and the IFRS Foundation has recently announced a continuing initiative to create new reporting prototypes , ESG-linked private and public sector bonds are still a very small fraction of securities in issuance and the market is fragmented.
So just as ESG investing has gained traction, the gap between ambition and verifiable compliance has widened. Regulations are not widely understood, and reliable data on which to base decisions is scarce. In our latest survey, 59 per cent of respondents in Europe said that data – or the lack of it – remains the biggest barrier to integrating ESG into their investment processes.
"To drive these changes home, they need a scalable ESG data model that can support their operations"
The data challenge extends across industries and asset classes, and it is becoming more acute. Investors are moving beyond the early phase of ESG adoption, which focused on excluding some assets and labelling others green, towards more nuanced thematic investment strategies. Full ESG integration will demand granular data that can inform decisions on carbon and other environmental impacts, and highlight the social consequences of real-world businesses. Alternative and non-listed assets, where disclosure requirements are low but investor appetite is growing, present a particular challenge.
The BNP Paribas ESG Global Survey 2021 shows that investors are moving decisively from learning about ESG investing to putting it into effect. They have typically identified their base-level compliance requirements for the EU’s Sustainable Finance Disclosure Regulation (SFDR) and have conducted compliance risk assessments. Moreover, they have begun to move towards making ESG an operational investment model, integrating ESG targets into their investment strategies, decisions and marketing.
But to drive these changes home, they need a scalable ESG data model that can support their operations. They need to ingest and analyse data across a huge range of subjects, in many formats, using hundreds or even thousands of data points, and make it serve their ESG strategies.
This is what BNP Paribas Securities Services’ Manaos data platform offers. Manaos, which has won multiple awards for innovation, stands out from existing data solutions by providing a single point of access to a universe of third-party data providers, selected by the user, with all data feeds integrated into a single interface. All the data can be analysed in the background according to parameters set by the user. Manaos works across asset classes, geographies and regulatory frameworks, whatever ESG methodologies are used.
This multiple-source, data-market approach is effectively an evolving ecosystem of applications and providers, not a preconfigured tool. It creates a customisable data model, offering multiple advantages including price transparency. Users avoid having to invest time, money and IT resources in their own ESG data infrastructure, and don’t have to become dependent on limited but costly outsourced solutions. Manaos creates a single platform source of reliable information available to investment, risk, marketing and regulatory teams who today generally rely on their own, often incompatible, databases.
"This multiple-source, data-market approach is effectively an evolving ecosystem of applications and providers, not a preconfigured tool"
This is a data solution engineered for change. Few aspects of investment are evolving as rapidly as the ESG arena, so the Manaos data market model is designed to be inherently flexible and adaptable. We believe this is the best solution to the challenge of sifting through incomplete and inconsistent disclosure and across multi-source, multi-format data streams to build the fullest picture possible of ESG performance and compliance.
Our latest survey results say it loud and clear: this is what investors know they are missing, a data gathering platform that will support transformative sustainable investing ambitions.