ESG data critical to informing fixed income investing

Written by Adam Cadle

18/09/2023

Ninety-eight per cent of European institutional investors and wealth managers believe that ESG data is important to informing their fixed income investment decision-making, with the majority also using more than one ESG data provider, research from Tabula Investment Management has revealed.

Just over half of those surveyed said they use two ESG data providers, with 11% using three and 2% using four.

When asked to rank what drives the decision to use ESG data providers to support fixed income investment decisions, respondents rated quality of rating methodologies as most important; ease of use (reporting, platforms) was second; geographical coverage third; and issuer coverage fourth.

In terms of the types of ESG data investors and wealth managers source from third-party providers, 58% cited SFDR, principal adverse impact and other regulatory reporting requirements information. More than half (55%) ask for ESG ratings while half of those surveyed see raw corporate data disclosed by issuers such as emissions data and gender pay gap figures. Forty-six per cent say they look at business involvement screens, while 38% analyse data on climate risk and temperature scores. More than a third (36%) seek data on alignment with the Sustainable Development Goals and the same number source information on impact ratings.

Almost all those surveyed say that differences between providers’ ESG ratings for the same issuer make using that data a challenge.

Jason Smith, chief investment officer at Tabula, said: “It is encouraging that so many investors consider ESG data integral to making their fixed income investment decisions. It is also intertwined with the increased expectation by regulators to include such issues when compiling portfolios. But for investors to apply this data in any truly meaningful way, and to comply with ever-stricter ESG guidelines, they need standardisation, consistency and inexpensive access.”

A total of 100 European institutional investors and wealth managers were surveyed with combined assets under management of over €150bn.

Related Articles