Keep ESG disclosures to useful metrics, benchmarks, say investment managers

COMPANIES are providing more data on environmental, social and governance (ESG) factors, but not all the information will be useful for investors. Investment managers attending Ecosperity Week, a three-day sustainability conference presented by Temasek, instead suggested focusing on how the information would be used.

"The abundance of (ESG) data is out there, and it's very useful as long as you actually understand what it is and you know what you want to relate," said BlackRock's managing director and co-head of sustainable investing for the Asia-Pacific, Emily Woodland.

Speaking at The Future of ESG Integration panel on Thursday, she said it is possible for the asset manager today to collect 3,000 ESG data points on each company. Yet, only around 20 per cent of these data points will "materially affect financial performance".

Panellists said more can and should be done to make it easier for investors to utilise data effectively in their investment decisions. For instance, S&P Global Market Intelligence president Martina Cheung noted that companies are making "long commitments" that stretch up to 2040 or even 2060. But these companies do not necessarily provide near-term or immediate information for clients or investors to track against the longer-term goals.

Ms Cheung also said while there is a lot of data out there, some of it is still "hard to come by". More can be done to make data accessible, she added.

Overall, however, panellists agreed that there has been substantial progress on ESG reporting.

A NEWSLETTER FOR YOU

Friday, 12.30 pm

ESG Insights

An exclusive weekly report on the latest environmental, social and governance issues.

Sign Up

Sign Up

Ms Cheung noted that there has been a 50 per cent increase in companies that want to engage with S&P and report against its Corporate Sustainability Assessment - an annual evaluation of companies' sustainability practices.

BlackRock's Ms Woodland noted a 360 per cent increase in Sustainability Accounting Standards Board (SASB) disclosures in 2020. There was also "particularly good traction" in the Asia-Pacific region, although she acknowledged the increase came from a "low base". ( see Amendment note)

Temasek's managing director for ESG investment management Park Kyung-Ah said ESG data is "foundational" for investors to understand material risks and opportunities, and to get a "holistic picture" of how a company operates.

Ensuring "verifiable and transparent data" is therefore a must, she said. While voluntary efforts are great, mandatory disclosures are necessary for the most financially material information that investors in the market "really need to make some key decisions".

Amendment note: An earlier version of this article stated that Ms Woodland noted a 360 per cent increase in salary disclosures, It was in fact SASB disclosures.