Publishing ‘investment-grade’ ESG data more likely to attract investment, finds survey

Companies that gather, use and disclose ‘investment-grade’ ESG data ‘can expect to be rewarded’ across multiple fronts, according to a recent survey.

Benchmark ESG gathered views from 770 investment decision-makers on the challenges and opportunities around ESG investing and find there is a significant upside for companies that gather and offer genuinely useful ESG data – or ‘investment-grade’ ESG data, as the firm calls it.

The survey finds that around 85 percent of investors, including 91 percent of institutional investors, consider investment-grade ESG data more important than other company data when informing their investment decisions.  

Reporting such data not only offers investors the chance to assess future risks and opportunities for companies, but also serves to foster trust in management. Benchmark ESG finds that 94 percent of respondents say they are more likely to invest in companies that produce, use and report investment-grade ESG performance data than they are in those that don’t. And 91 percent of respondents say they would have greater confidence in the senior leadership team of companies that successfully collect, use and disclose such data.

Still, it seems many firms are failing to produce the quality data investors expect: only 64 percent of respondents say the ESG data that Fortune 500 companies produce meets their definition of ‘investment grade’. Of the 39 percent of respondents who view environmental data as most important for their investment decisions, 80 percent say the quality of that data needs improvement.

ESG data challenges

There are a number of challenges to producing better investment-grade ESG data. Across the sample of 770 investment decision-makers, almost a third (32 percent) of respondents cite a ‘lack of digital technology and tools for quality data collection’ as the primary barrier companies face in collecting and using investment-grade ESG data.

The persistent lack of standardized metrics and methods for measuring and reporting investment-grade ESG data and a lack of relevant in-house expertise in measuring and reporting ESG company performance are cited by 28 percent and 26 percent of respondents, respectively.  

A quarter each say they see a lack of cross-functional collaboration and appropriate ESG performance measurement and reporting workflow at companies, as well as a need for external services.