White Paper

Overcoming ESG Data Challenges

Vassilios Papathanakos, PhD Executive Vice President, Deputy Chief Investment Officer
Valerie Azuelos Managing Director, Product Specialist
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Key Ideas

  • As ESG takes its place in the investing mainstream, managers must confront the challenges involving ESG data, including reliability, frequency, breadth, and depth.
  • Focusing on portfolio-level outcomes and stable ESG characteristics can help mitigate the effects from data shortcomings in achieving investor objectives.
  • A closer look at the data from a leading provider shows that even portfolios derived from simple filtering by individual stock ESG ratings can result in a stable score boost over time, and that the pillar ratings are largely independent of each other.

Introduction

ESG investing is establishing itself as a topic of far-reaching importance. While the forms it takes vary, industry trends demonstrate a clear increase in interest in and adoption of ESG considerations, both in breadth and depth, from institutional investors. Managers are motivated to introduce, or expand, their integration of ESG within their investment processes, or risk missing out on the increasing number of new business opportunities for which ESG integration is a minimum requirement.