Costs of ESG Data Concern Dutch Institutional Investors
60% of Dutch institutional investors are grappling with the costs of ESG data, a figure significantly higher than their counterparts in Europe (43%) and globally (38%). This is according to the ESG Global Survey 2023 by BNP Paribas. The biennial research report discusses the strategies that institutional investors around the world are implementing to achieve sustainability and the obstacles they face in this endeavor.
Respondents have pointed out that the rising costs of quality data have been a topic of discussion during recent months. With the Corporate Sustainability Reporting Directive (CSRD), definitively adopted by the European Parliament on November 28th last year, approximately 50,000 companies will be required to report on the impact of their business activities for the first time between 2025 and 2029. This reporting also extends to suppliers. For a thorough analysis of their own supply chain, high-quality data is essential.
For institutional investors, the Sustainable Finance Disclosure Regulation (SFDR) is particularly relevant. This European regulation aims to increase transparency regarding how financial entities incorporate sustainability risks and opportunities into their investment decisions. Thus, for financial investors it serves as a counterpart to the CSRD for businesses. With the CSRD and SFDR legislation, companies and their investors are brought together in the realm of data. However, obtaining high-quality data remains a challenge.
Shortage of High-Quality Data
Currently, many companies lack the expertise or capacity to collect data themselves, and methodologies, especially for data on social issues that fall under ESG, are still in their infancy. The increased demand has made data more expensive. Dutch investors appear to invest more in data on social issues than their sector peers. 30% of Dutch institutional investors purchase this data externally, compared to 23% in Europe and only 19% of institutional investors globally admitting to doing so. Responses indicate that they are investing extra in data on social themes, expecting these to rise higher on the agenda in the coming years.
Data Transparency is Crucial
67% of Dutch institutional investors find the transparency of third-party ESG data crucial, considerably more than their peers in Europe (46%) and globally (44%). Interestingly, Dutch investors are less likely to use and compare multiple data sources. 53% of Dutch investors do this, compared to 66% in Europe and 62% globally.
High Quality Standards
About three-quarters (73%) of institutional investors in the Netherlands thoroughly check the quality of the ESG data provided. They also supplement missing information when necessary. This is considerably more frequent than globally (47%) and in the rest of Europe (46%). It demonstrates that Dutch institutional investors are committed to invest time and money in verifying data quality to comply with the CSRD and SFDR.
“The urgency to link reliable and transparent ESG data to the investments of institutional investors has significantly increased in recent years. This necessity arises from new legislation and the revision of sustainability goals by investors. By linking ESG data to their investment portfolio, our clients better understand how to achieve their sustainability goals, how to monitor them, and how to report on them.”
About the ESG Global Survey 2023
BNP Paribas releases the ESG Global Survey every two years. This research focuses on how institutional investors from Europe, the APAC, and North America are faring on the path to sustainability. In 2023, the focus was on the strategies that institutional investors apply to invest sustainably and the obstacles they encounter. A total of 420 respondents worldwide participated, including 30 Dutch institutional investors.