Need for Mastering ESG Data

While ESG data can be synthesized internally through checklists and other mechanisms by asset managers themselves using their own internal criteria and metrics, there are multiple providers who maintain ESG data in varying degrees of coverage. ESG data may be required in a variety of applications. Order management systems might require ESG data to check for compliance prior to the execution of a trade. There might be a need for alerts or flags of the held securities that breach an ESG threshold. Reporting tools might also require ESG data to check the current state of compliance at multiple levels ranging from portfolio, strategy or analyst levels.

1) Some asset managers might want to create a checklist for the internal computation or assessment of ESG metrics. This will require a solution with native capabilities to permit users to master data.

2) Each of the applications may be managed by different teams. Each of these teams will eventually maintain ESG data in the format, volume and quality as they will require, leading to a lack of standardization and integrity.

3) Each of the applications may try to retrieve data for their own set of requirements, leading to a redundant increase in the number of data requests and retrievals.

4) ESG data will become inconsistent over time across applications, especially if they work in silos.

5) As the fund grows, the amount of ESG data required to be sourced will also increase in proportion to the issuer of the securities and corresponding countries. There might also be a need to increase the number of ESG issues being considered, which will amount to an increase in volume. While there are some dataflows that will require automation, there will be also some dataflows that will require tracking and monitoring.

ESG Data Mastering Solution: IVP Security & Reference Master

IVP Security and Reference Master, with a configurable data model, allows users to master ESG data as per their requirements without the need for customization of the application. This configurable data model allows asset managers to maintain and change customized ESG checklists as per their requirement without the reliance on the external IT team. IVP Security & Reference Master also has native capabilities to support sourcing from multiple ESG data sources, produce a blended golden copy of ESG data, store ESG data at both the issuer and at the country level, and distribute the copy of ESG data to multiple applications for their consumption. This solves a multitude of problems related to a lack of standardization and redundant data retrievals as it maintains consistency across applications and allows asset managers to scale at ease. The growth and adoption of ESG data is going to continue as managers seek new opportunities. Managers must continue to examine their data management capabilities to ensure customization, continuity and scalability once in use.

[1] Emily Chasan, “Spending on ESG Data Seen Rising to $1 Billion Amid Asset Growth,” Bloomberg, March 9, 2020.

[2] Manpreet Gill, “ESG investing: what is it and will it give me better returns?” Standard Chartered, May 21, 2018.