ESG Investing’s Real Problem Is a Lack of Data, Fixed-Income Pros Say

As the debate heats up over ESG investing, fixed-income professionals say they need more data than what’s currently out there.

A survey of 111 senior buy-side fixed-income investors, conducted by analytics firm Coalition Greenwich, found that 90% believe the popular strategy, which prices in environmental, social and governance risks, is important to decision making. Yet only about a third of investors have fully integrated ESG into their risk-analysis. The reason? Not enough data.

“It boils down to risk-management,” said Coalition Greenwich’s senior analyst Stephen Bruel. “If you don’t have reliable ESG data about an issuer or issuance, then it’s harder to calculate what the negative consequences might be.”

The report’s findings come just as Republicans are escalating attacks against Wall Street’s ESG investment practices. States including Florida have pulled money from firms like BlackRock Inc., sustainable investing’s biggest champion. Tesla Inc. founder Elon Musk and former Vice President Mike Pence have also piled on with public attacks against ESG. Meanwhile, regulators are cracking down on the mislabeling of sustainability-linked funds and bonds, and some say the acronym should just be dropped altogether.

Even though ESG has morphed into a “woke” bogeyman for US conservatives, demand for sustainable investing continues to grow. Global ESG assets will exceed $40 trillion this year, and $50 trillion by 2025, according to Bloomberg Intelligence. The forecast suggests ESG is here to stay.