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Buy-side firms rank screening organisations as top driver for using ESG data

More than a third of executives working for buy-side firms across the UK, US and Asia rank the screening of potential organisations as an investment factor in asset allocation among the main reasons their business uses ESG data. This makes it the top driver for ESG data usage overall.

The findings were part of recent research undertaken by Alveo, a leading provider of cloud-based market data management services, polling executives working for buy-side financial services firms in the UK, US and Asia.

Surprisingly, when asked about the main reasons that their business uses ESG data, regulatory reporting was not among the key drivers. Regional priorities vary, with new product development topping the US poll, client reporting being number one in the UK and screening potential investments/asset allocation leading the way in APAC. More respondents in the US focus on ESG for new product development versus client reporting (UK) or asset allocation (APAC).

Alongside the EU’s strategy to drive sustainable finance growth, asset owners and managers are required to follow the Sustainable Finance Disclosure Regulation (SFDR), which covers ESG disclosure obligations, yet just 21% of the survey sample cited regulatory reporting as a key driver.

32% ranked the improvement of the overall reputation of the firm in the wider market among their top two drivers, making it the second placed driver overall. Given the range of use cases, firms have to improve their ESG data management. Priorities coming out of the research are to improve data comparability, which was highlighted in the top two by 40%, closely followed by improving data usability and data availability (both 37%). Improving data usability is the top priority in Asia.

With firms investing in their ESG capabilities, reducing the cost of ESG data is less of an issue in all three regions, with just 11% of the sample in Asia ranking it among their top two. Looking to the future, new technologies and capabilities are seen to have an ever-stronger influence. Evolution of ESG data management capabilities is the top ranked driver, cited by 34%, with the use of advanced analytics and AI technologies close behind on 31%.

“Asset managers see the move to ESG and the requirement to better manage their ESG data as urgent imperatives rather than ‘nice to haves’. Although different regional priorities have come out of our research, all stakeholders require complete, accurate and timely ESG data. Putting an organisation on a consistent ESG data footing has to be combined with easy access and workflow integration to provision users and applications across the investment process,” said Neil Sandle, Head of Product Management at Alveo.

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