Spending on ESG data is expected to increase rapidly in 2023, according to a new survey of more than 100 portfolio managers, climate risk executives, and data management executives conducted by Bloomberg and Adox Research.
Bloomberg ESG Survey Results
According to an online survey conducted in March 2023 by global market data vendor Bloomberg and consulting and research firm Adox Research, a majority of executives (92%) plan to increase the spending on ESG data by more than 10% in 2023, with 18% planning to increase their spending by 50% or more. Click here to see the complete results of the recent ESG Data Acquisition & Management survey.
Survey participants explain that close to one quarter (24%) of this spending will be for ESG benchmarks and indices, while 19% of their budgets will be spent on company reported ESG data, and 17% will be spent on ESG scores from various ESG ratings agencies.
When asked which criteria they thought were the most important for selecting an ESG data provider, survey participants said that data quality ranked first, with breadth of coverage and the cost of the date ranking second and third, respectively.
While most firms say they are spending more on ESG data in 2023, they also admit they are struggling with how best to manage this data. Over 70% of firms participating in this survey say they take an ad hoc or decentralized approach to managing their ESG data, while only 29% say their firms take a centralized approach to evaluating, licensing and managing their ESG data requirements.
When asked what is the most challenging aspects of managing their ESG data over half (55%) said that handling the changing data content was their greatest issue. However, half of those surveyed found that managing multiple ESG vendor feeds was a concern, while a similar percentage (48%) found that linking their ESG content to existing entity / instrument identifiers was a significant challenge for them.
In addition, most survey respondents (64%) consider themselves to be ahead of their competition when it comes to their ESG capabilities, though nearly 30% feeling they might be somewhat or significantly behind their peers. Despite this fact, survey respondents are nearly unanimous (99%) about the value their firms place on ESG data. Of this total, 45% say it is important to keep pace with their peers; 44% feels it helps them achieve a competitive advantage; and 10% say it is important for regulatory compliance purposes.
Our Take
The one finding from the recent ESG survey conducted by Bloomberg and Adox Research that was most surprising to us at Integrity Research was the sharp increase in ESG data spending expected by most participants. Almost one fifth of those surveyed (18%) expected to increase their ESG data spending by 50% or more. This is a stunning result.
The other finding we were surprised by was the fact that less than one third of all survey participants (29%) take a centralized or firm wide approach to evaluating and implementing their ESG data needs. The bulk of the market (71%) takes a decentralized or ad hoc approach to purchasing and managing their ESG data.
We suspect that both of these findings are a result of the fact that ESG data is a relatively new part of a firm’s data mix. This means that budgets for ESG data are not yet well established and historical spending is starting at a low base. In addition, most firms have not yet figured out whether ESG data should be handled like the remainder of their data purchases, or whether it should be handled in specific business units where staff has significant domain expertise. As a result of these factors, most firms are struggling with how best to manage their ESG data needs.
Gert Raeves, Research Director and Founder of Adox Research explains these findings saying, “While firms are planning for ESG data to become a part of mainstream data and research workflows, they realize that the age of ESG data behaving the same as other financial data sets has not yet arrived. In the meantime, they are prioritizing technical scalability and data transparency to make sure analysts, investors, and regulators have the right tools to select, curate, and enrich existing datasets with key ESG attributes.”