Northern Trust Market Study: Data Needs Top the Challenges With ESG Investing

Northern Trust and PwC conducted a global ESG market study to explore institutional investor attitudes, future needs and preferences, as well as key trends and implications for businesses.

As Environmental, Social and Governance (ESG) considerations become more embedded in institutional investment portfolios, investors face a number of complexities, including data sourcing and standardization, as well as evolving regulatory reporting needs, according to a Northern Trust-sponsored market study conducted by PwC in second quarter, 2022.

Northern Trust today issued a white paper, ESG’s Imprint on Institutional Investing, that offers insights into how institutional investors plan to navigate the challenges presented by a growing ESG environment.

When asked about the top challenges in incorporating ESG into their investment process, both asset managers (89%) and asset owners (79%) identified “collecting and analyzing data” as a top challenge. Similarly, both asset managers (82%) and asset owners (77%) identified “securing and normalizing sustainable investing data” as a key challenge.

“This study shows that ESG is a top priority for institutional investors, but a dearth of standardized data on sustainability makes implementation difficult,” said Paul Fahey, head of Investment Data Science (IDS) at Northern Trust. “Digital innovation is transforming the investment landscape and advances in data science can be a key development in helping asset owners and managers make sense of increasing volumes of data across the ESG spectrum.”

The study found that while most asset owners and managers are prioritizing ESG initiatives, various complexities remain. When asked what their greatest ESG needs are for their investing practices, asset managers (76%) cited internal reporting and data, with nearly half of surveyed asset owners (40%) sharing this notion. Continuing this trend, the study found that both asset owners and managers identified analytical service needs and data solutions as a top challenge.

“Sustainable investing is the driver behind a number of initiatives that require greater monitoring and analysis of material risks and disclosures,” said Jeff Greaney, Lead Product Manager of Accounting, Analytics, and Derivatives at Northern Trust. “Recognizing this, we've developed a suite of analytical solutions, available through our Investment Risk and Analytical Services group's ‘ESG Insights’ product suite, that can provide insights to help clients meet their ESG responsibilities.”

In a rapidly shifting regulatory environment, the need for data standardization is clear: the study found that asset manager (83%) and asset owner (67%) survey respondents cited “regulatory compliance” as one of their top challenges. Interestingly, 95% of asset managers said that they understood all or most of the relevant regulations, while 60% of surveyed asset owners shared this sentiment, signaling a need for stronger clarity around data requirements as ESG continues to become increasingly mainstream.

The white paper ESG’s Imprint on Institutional Investing can be accessed here.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 22 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2022, Northern Trust had assets under custody/administration of US$12.8 trillion, and assets under management of US$1.2 trillion. For more than 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Please visit our website or follow us on Twitter.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Please read our global and regulatory information.

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