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What’s driving investment and wealth managers’ ESG strategies?

Data connects E, S and G


To the point


Takeaways to consider:
  • Set clear processes and controls across the ESG data lifecycle, from collecting and ingesting, to managing and modeling, mapping to the appropriate frameworks, and publishing to end-users or your clients.
  • Collect and confirm ESG data from material public companies before use; address data gaps in private markets by engaging directly with investee companies or using smarter technologies (e.g., artificial intelligence).
  • Seek diverse, alternative data sources to improve the baseline understanding of the risks faced by both individual assets and the whole portfolio.
  • Establish a cohesive data-gathering plan, collate separate requirements, and identify overlaps to minimize and streamline information requests.
  • Nominate clear data owners and assign data stewardship to provide ongoing oversight.
  • Establish ESG data frameworks to provide standardized results across diverse asset classes at both the asset and portfolio levels.
  • Create clear connection points and leverage synergies between data and corporate strategies. 


Data is central to investment and wealth managers’ (“managers”) environmental, social and governance (ESG) strategy. However, collecting and managing the right data can be a “wicked problem”: broad, complex, and with constantly evolving business and regulatory requirements. The effort to address one challenge may uncover or even create another.

But what does this mean for you? The implications vary across the three ESG pillars.

Environmental challenges are market wide, affecting assets both publicly and privately owned. They have created a systemic need for data.

By contrast, the consideration of an investment’s social impact, the need for managers to address it and the data required remain immature at the business and regulatory levels.

Finally, governance is overseen at the corporate level. Managers are now shifting their focus to linking corporate and enterprise data governance, and how this can help establish a more streamlined and robust framework for managers to execute their investment strategies.

This article addresses the E, S and G data challenges by exploring the data lifecycle journey and outlines a series of takeaways for your ESG strategies.

E: private market data is tough to find, even when you know what you’re looking for

While public market investors were the first to focus on ESG concerns, private markets have now caught up.

Standards are finally emerging, albeit slowly. But while requirements are evolving, it is difficult to access ESG data. Limited information on private companies’ climate positions is publicly available or easily accessed. Moreover, the data provided by companies themselves is often immature or incomplete. While investors can look to third-party data providers, this process is often costly with patchy results.

Accordingly, analysts and managers are scrambling to find new, alternative data sourcesi. These should be agile, accurate, reliable, comparable, diverse, granular, and forward-looking. Examples of alternative data sources to ingest or import are:

  • Real-time traceability dataii that includes information on portfolio impact (e.g., product passports, carbon footprints and social criteria). By providing transparency, managers build trust and confidence in sustainable products and services.
  • Environmental geospatial data (i.e., time-based data related to a specific location) that is integrated into the data framework to gain insights on initial and ongoing environmental impacts.
  • Forward-looking data (i.e., data points that seem disconnected or irrelevant but form a useful input for analysts when connected, or smart web scraping of information that is hard or costly to find through traditional sources) to build algorithms and artificial-intelligence-driven profiles for private companies.

S: go the extra (social) mile

Managers mainly focus on the E and G in ESG since both benefit from relatively accessible and measurable data. By contrast, quantifying the social impact of investments is a significant and complex challenge, with the lack of standardized social metrics and well-defined regulatory requirements leading to confusing S reporting.

Nonetheless, the S needs to be considered as much as the E and the G. Academic researchiii has shown a positive correlation between firms’ social and financial performance. Managers should examine how companies measure social objectives and monitor them.

The EU Social Taxonomy has suggested three social objectives:

  1. Decent work for employees along the value chain;
  2. Adequate living standards and wellbeing for consumers; and
  3. Inclusive and sustainable communities.

While the EU has not yet specified regulatory requirements for data, managers will be held accountable for the impact of their investments along these social objectives.

For example, are investee companies supporting their employees’ health and wellbeing through absence and churn management processes? Managers could monitor changes in key performance indicators (KPIs)iv , such as staff turnover, training and qualifications, absenteeism rates and reasons, and the workforce’s maturity, and document the evolution over time.

To prevent “social washing” risksv, managers should actively engage with investee companies to collect data points that map to these social objectives. For example, oil and gas companies should mitigate the risks of job losses in oil-dependent cities like Aberdeen as they transition to renewable energy.

Managers should also gather information on the community impacts of investee companies’ activities. These impacts have historically either been wholly overlooked or minimally considered in the desire to produce financial results.

G stands for governance: data as well as corporate

Managers have realized the importance of ESG data and consider it a valuable commodity, not only to cater to regulatory requirements but also for investor reporting, product development and alpha generation.

Nonetheless, when it comes to the G, the most-used metrics focus on traditional concepts, such as corporate governance, business conduct, risk management, supply chain management and materiality policies. Few metrics explicitly link the concept of governance to data governance.

The increase in data sources and volume, both internal and external, have created operational challenges for ESG data governance across all steps of the data lifecycle. But the most critical challenge is how to aggregate and transform data while maintaining consistency and quality.

Non-standardized data inhibits managers from assessing ESG-related performance and may lead to greenwashing risks. Therefore, ESG data governance and associated data quality control are key. To meet evolving regulatory and client requirements and improve current data governance processes, managers may seek to enhance their current tech infrastructure.

A better ESG data governance process: action points in the ESG data lifecycle

Managers need to set goals for their ESG data lifecycle across four stages:

  1. Collect and ingest data from various sources for both public and private investee companies;
  2. Normalize data, and build a data model that aligns with your operational model;
  3. Map the data to your appropriate frameworks and processes;and
  4. Analyze, approve internally, and publish to internal and external end-users, i.e., regulators and investors/customers.

Table 1 lists the actions that managers can take at each step in the ESG data lifecycle.

When can greenwashing occur?

Greenwashing can happen at any point of the fund and product lifecycle, which is divided into three main stages:

  1. The pre-contractual stage
  2. The post-investment and ongoing-reporting stage
  3. The complaints-handling stage

The table addresses firms’ key challenges in mitigating greenwashing risk at each stage and provides relevant regulatory requirements and actions that firms can take.

Fund/product lifecycle

Regulatory requirements/guidance

Actions for addressing key challenges





Pre-contractual stage

Financial Conduct Authority (FCA):

Requires that names, objectives, documented investment strategy and holdings be consistent; and

Requires comprehensive information on strategies and stewardship policies.


Requires disclosures on firm websites: sustainability due diligence, sustainability risk and remuneration policies; and

For Article 8 or 9 funds, the following disclosures are required on firm websites and pre-contractual documents: investment strategies, objectives, top holdings, due diligence, data sources and limitations to methodologies and data.

Obtain, analyze, and use sustainability data, which is often incomplete or infrequently available, to make investment decisions; and

Ensure that fund documentation and firm-wide policies provide clear and specific information in a non-technical way on the objectives and strategies of sustainable products, and whether there are data limitations and how they are being addressed.




Post-investment and ongoing-reporting stage


Suggests providing ongoing performance reports on how well a fund meets its stated objectives and any relevant information used to facilitate investment decisions; and

The profile of a fund’s holdings should always be consistent with its disclosed objectives.


Requires periodic disclosures on how environmental and social characteristics have been promoted (for Article 8 funds) or how sustainable objectives were attained (for Article 9 funds); declarations that no significant harm has taken place towards certain sustainable objectives (Article 9); and the fund’s top holdings and actions taken to achieve its objectives.

Have a strategy to deal with unexpected new sustainability data on investee companies in funds from various sources, potentially affecting the fund’s objectives.




Complaints-handling stage

FCA’s dispute resolution: complaints sourcebook (DISP) rules require firms to:

• Assess the subject matter of complaints fairly, consistently, and promptly;

• Consider whether the complaint should be upheld, and whether and what redress should be provided;

• Observe a time limit for responses, which should be fair, clear, and not misleading; and

• Maintain complaints-handling policies.


• Have policies and procedures in place for compliance or other relevant functions to properly investigate complaints related to greenwashing. This includes assessments against the FCA’s complaints-handling rules and determining whether compensation is required.


Collecting and ingesting data

While every company has both positive and negative E, S and G impacts, there is a huge divergence in ESG ratings from vendors, with discrepancies in measures, scope and weights. While variations in manager’ preferences around scope and weights are acceptable, divergence in measurement is problematicviii. Given their fiduciary duty, managers must choose their data providers carefully and be ready to explain why they have made certain choices to all stakeholders, from employees to customers and regulators.

Managers should tailor the scoring methodology to their business model. They should make a cohesive data-gathering plan, collate separate requirements, and identify regulatory overlaps to minimize and streamline information requests from investee companies. While managers can collect data directly from private companies, for public companies, they can use proxies from modeling approaches and incorporate existing information from entity structures.

For material companies, ongoing updates and confirmation should be incorporated into an incremental update to the active engagement agenda in the operating model.

Managing and modeling data

A sound data-governance process is required to effectively manage the data collected. This should include a single platform that standardizes and consolidates data from various sources, and a well-designed data model flexible enough to incorporate new data and extend the database. Any new data should feed into the same platform so all stakeholders can access the same information.

The rapidly broadening regulatory requirements for market data—from indexation, valuation and pricing data to newer data such as geospatial, sentiment or cardinal emotion—are so complex that few participants can understand them. This naturally leads to a layer of review and oversight, which is not intuitively achievable by managers today. Therefore, education on these key measures and how to use them is essential.

From a data perspective, this requires a clear nomination of data owners and stewards who can provide the ongoing steer and oversight of the data. Ownership should not lie with risk and compliance nor with sales and trading. Instead, the business should own it directly, with the technology team as the enabler and the data management team as the steward.

The enabler needs to collect and ingest data from various sources, while the owner and steward should collaborate to set rules for both data quality and the monitoring process. The steward should also assess data fields’ criticality and monitor the process and critical data fields over time to ensure all data is aggregated promptly and accurately.

This data governance structure can ensure the information is correctly held and the data “use-case” is appropriately measured. The ability to fully automate this process and provide it to the decision-makers heavily relies on controls and high data quality. Data governance should also be embedded in the operations model with assurance.

Mapping, analyzing and publishing data

A broad range of disclosure standards and frameworks has been developed, where managers can organize the data by mapping it to the appropriate framework(s). Table 1 lists some examples of widely used ESG frameworks. While no existing regulatory framework exists for the S, an alternative is to map data to companies’ social objectives.

After documenting the data, companies need to publish how their metrics have evolved over time. An analysis framework is also required to access the datasets and gain actionable insights. New tools and technologies can help in extracting and delivering insights at scale.

For example, many public companies have been proactively disclosing information through detailed sustainable reports and newswires using NLP or sensitivity analysis. Processing reports with NLP can retrieve information directly and promptly, and compare and assess vendors’ or internal ratings. Managers should centralize the most accurate view of the data once an update is collected or overridden.

While managers are free to follow their own procedures, a common framework is necessary to facilitate and align the E, S and G to support decision-making and reporting.

[i]  CFA Institute, AI pioneers in investment management, September 30, 2019.

[ii]  We appreciate Andrew Matthews, Deloitte and Andrew McNeill, Deloitte’s content contribution on traceability data.

[iii] Joshua D. Margolis, Hillary Anger Elfenbein and James P. Walsh, Does it Pay to Be Good...And Does it Matter? A Meta-Analysis of the Relationship between Corporate Social and Financial Performance, March 1, 2009.

[iv] The European Federation of Financial Analysts Societies Framework, KPIs for ESG, 2009, provides managers and companies with recommended KPIs within the framework of an existing performance communication, e.g., financial reporting, management discussion and analysis, corporate social responsibility reports, and the Global Reporting Initiative's G3 Guidelines.

[v] Etica Sgr, Social washing: What is it and why could COVID-19 be making it worse?, July 3, 2020: “Social washing can be defined as a practice aimed at improving a company’s reputation through social responsibility initiatives which are not effective or, in the worst cases, under the guise of social responsibility but with the goal of economic return.”

[vi] Rick Lacaille, Anna Bernasek, Karen Wong and Phil Kim, The future of ESG: Supplying the demand, State Street, June 2022.

[vii] J.P. Morgan Asset Management, ESG social factors: Accessing the “S” in ESG, April 2022.

[viii] Florian Berg, Julian Kölbel and Roberto Rigobon, Aggregate Confusion: The Divergence of ESG Ratings, Forthcoming Review of Finance, August 15, 2019. 



ESG is not solely about the E, S, or the G; all three should be addressed together. While market dynamics are driving change in the E, market participants are not mature or bold enough to tackle the S; so managers should go the extra mile. Overarching data governance is equally important as corporate governance for the G. Managers need to own, manage and clearly strategize around data.

ESG data frameworks should be established at both the asset and portfolio levels, and provide standardized and comparable results aligned to diverse asset classes. The ongoing improvements in ESG data should enable managers to account for previously unmeasurable metrics that are valuable to stakeholders. The evolution and maturation of ESG data will improve decision-making and drive the growth of incorporation of ESG factors into investment decisions.