ESG information to continue to overwhelm advisers

Advisers overwhelmed by volumes of ESG information can expect to see no change in this over the coming years and it will be impossible to find a “sweet spot” of how much is appropriate.

In a panel session at the Responsible Investment Association of Australasia (RIAA) national conference, a panel of rating experts discussed the volume of information provided by different rating houses and how it differed between providers.

Responding to an audience question about what could be done about the overload of information advisers received, Jono Broome, associate director at Morningstar Sustainanalytics, said he was pessimistic about this change in the future.

“Too much information is a symptom of this industry and the range of things people have to cover; the list goes on and on, and I am hugely sympathetic [to] that feeling of being overwhelmed. More data is the direction this is going towards, and people need to decide how to make it useful and meaningful to them. 

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“We won’t ever hit a sweet spot, unfortunately, as some people will always want as much as possible  and others will want less and want it to be more succinct.”

He highlighted regulatory work in the EU to implement minimum best standards as a form of metric, although he stated the regulators globally would be unable to agree on specific standards, which would be an “absolute nightmare”.

“It’s fantastic because everyone [in the EU] is looking at the same data points right the way through the value chain, and companies have to report on them, and advisers will have to refer to these exact same metrics. So there is definitely a role the regulator can play.”

Asked what they expected to see from ESG in three years, the panellists were in disagreement on the future of the space.

Trista Rose, head of sustainable investments at FTSE Russell, said: “Hopefully, we face less of a challenge once we move to mandatory reporting; hopefully, this will give investors more faith in the data because it is regulated”.

Julia Leske, head of ESG Australia and New Zealand at ISS ESG, said: “I hope we will have got our heads around how to best report data and can move on to talking about whether it has addressed problems such as disclosure and greenwashing and where we can go next. I want to be talking more about thematics such as climate, biodiversity and modern slavery”.

However, Broome disagreed and said he felt ESG would still be complex in three years’ time. 

“I disagree; things will remain complex and there will be even more volumes of data. We will be continually talking about regulation and data for compliance purposes. 

“The other big change is artificial intelligence. Previously, the next big thing was blockchain, and AI will eat blockchain for breakfast, and that will impact ESG. We are only just scratching the surface of what AI can do.”