Ninety-eight per cent of European institutional investors and wealth managers say ESG data is important to informing their fixed-income decision-making.

The survey of 100 institutional investors and wealth managers with assets under management of €150bn by Tabula Investment Management, found that the majority of investors and wealth managers surveyed use more than one ESG data provider. Just over half said they use two providers; 11 per cent use three and 2 per cent use four.

When asked to rank what drives the decision to use ESG data providers to support fixed-income investment decisions, respondents rated the 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 per cent cited Sustainable Finance Disclosure Requirements, principal adverse impact and other regulatory reporting requirements information.

More than half (55 per cent) ask for ESG ratings while half of those surveyed seek raw corporate data disclosed by issuers such as emissions data and gender pay gap figures. Forty-six percent say they look at business involvement screens, while 38 per cent analyse data on climate risk and temperature scores.

More than a third (36 per cent) seek data on alignment with the Sustainable Development Goals and the same number source information on impact ratings.

Almost all those surveyed said that differences between providers’ ESG ratings for the same issuer make using that data a challenge. One-quarter said inconsistencies make it very challenging to use the data while 69 per cent said it is quite challenging. Only 6 per cent said that discrepancies between ESG ratings for the same issuer do not make ESG data use a challenge for fixed income investment decision making.

Commenting, Tabula CIO, Jason Smith, 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.”

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