Looking under the hood #3: do we know all the truth on ESG data and ratings?

7 January 2021

The AMF published a while ago, a mapping on non-financial data, the lifeblood of ESG investments. It highlights the key challenges that investors should keep in mind before relying on those data to make an investment decision:

1. Potential conflicts of interests
The sustainable data area is currently dominated by major UK or US financial players, following years of concentration in the sector. Yet for data providers belonging to a group, their diversified service offering (ratings, index construction, portfolio analysis…) is likely to give rise to situations of conflict of interest.

2. Lack of consensus
The lack of consensus on both, the definition of what is non-financial, and how to measure a given concept leads to significant disparities in data collection, reliability, and processing. This may result in major discrepancies in the non-financial performance assessments published.

3. Lack of transparency
The level of transparency is currently too low and deficient for investors to understand the meaning of ratings, their scope, and their limits.

👉 A deep understanding of what is really behind the data is needed to avoid taking wrong investment decisions. 👀

Marlene Hassine Konqui