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As Asset Managers Spend Big on ESG, Data Management and Governance Will be Key

A new research report from Opimas, which was published earlier this month, has found that asset managers are by far the biggest buyers of Environmental Social and Governance (ESG) data in the financial sector, accounting for 59% of all spend. According to Opimas, one of the key drivers behind this trend is regulatory compliance.

RIMES is seeing a similar demand profile in its work with clients. Terri Morgan, Sales Manager at RIMES, explains: “We’re seeing the majority of interest in ESG data stem from the asset management community. However, rather than compliance, the key driver for our clients is to help with investment and performance differentiation.”

According to Opimas’ report, asset managers are obtaining their ESG data from several sources in order to cross-reference scores and ratings. Doing so introduces a significant data management challenge to these firms as the data needs to be validated and formatted before it is ready for consumption in operational systems.

Terri Morgan explains further: “by buying ESG data from a growing number of sources, asset managers are burdening themselves with non-core tasks. In addition to the central data management requirements, firms will also need to run data engineering processes to ensure the data is fit for consumption from a governance perspective. These are time-consuming jobs and certainly not the ‘alpha’ of investment firms. A much better approach is to outsource these tasks to data specialists like RIMES that can provide all the quality controlled, system-ready ESG data firms need in a simple feed.”

Another challenge for firms comes when they create ESG scores using in-house methodologies. Many firms are opting to create such proprietary scores for competitive differentiation. According to Andrew Barnett, Global Head of Product Strategy at RIMES, if not managed correctly, such scores could cause problems further down the line: “Firms creating their own ESG scores will need to be able to evidence and explain a fully governed scoring function that includes data lineage.

“They will also need to be able to provide transparency to their clients about their methodology and what the underlying data means. Without these abilities, it’s not beyond imagining another mis-selling scandal. Asset managers moving into ESG need to get their data foundation in place now to ensure they can outperform competitors and stay on the right side of regulators.”

Click here for more information on RIMES’ ESG data management services.

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