Bank of America kicks off $1.2m ESG data tie-up with Oxford

BofA latest financial firm to back growing trend of public-private tie-ups and private investments in ESG data

by | May 10, 2022 | bobsguide

Bank of America is investing $1.2m into an ESG data and research partnership with the UK’s Oxford University, the two institutions announced today.

Spanning three years, the collaboration will explore innovative data frameworks for measuring the climate impact of investments as one key focus area. As a second focus, it will identify carbon capture technologies and solutions.

The resulting research is intended to inform key investment decisions in the financial sector, and “offer implementable and equitable interventions to ensure business models are scalable and sustainable.”

The financial factor research will largely be conducted by teams at the Oxford Sustainable Finance Group at the Smith School and the UK Centre for Greening Finance and Investment (CGFI).

The two teams  will zero in on the integration of nature-related factors into financial decision-making.

The Group and CGFI are both led by Dr Ben Caldecott, a sustainable finance researcher, specialising in environment, energy, and sustainability issues.

“Successful partnerships between business, academia and governments are critical if we are to accelerate the transition to sustainable, secure and affordable energy and bring forward the path to net zero,” said Bernard Mensah, president of international at Bank of America.

“With the support of Bank of America, the work of the Oxford Smith School now has the potential to transform scalable carbon capture and greenhouse gas removal and also the integration of nature-based metrics into sustainable finance frameworks.

Deepening ESG data ties between finance and academia

As the climate crisis, and conversely, the ESG debate in finance, intensifies, financial firms have increasingly been entering into data and research partnerships with academic institutions to explore new frameworks for measuring climate impact.

In October 2021, US investment managers AQR, MFS, investor MassPRIM, as well as Japanese manager Asset Management One and data provider Quontigo, entered a partnership with the Massachusetts Institute of Technology (MIT) on a similar initiative, the Aggregate Confusion Project.

The project seeks to solve the problem of “noisy” and unreliable ESG data. The ACP cites the average rate of correlation of ESG ratings as 0.61%.

“By comparison, credit ratings from Moody’s and Standard & Poor’s are correlated at 0.92,” the group said on its website.

“This ambiguity around ESG ratings creates acute challenges for investors trying to achieve both financial and social return.”

In December 2021, asset management giant KKR announced a similar partnership with the University of Oxford Said Business School, launching what it calls the  Sustainability Expert Advisory Council, or SEAC.

The SEAC, a group of six interdisciplinary climate change experts, now provides guidance and research on improving KKR’s ESG and climate investment analysis.

These developments follow up on similar initiatives by Swiss private bank Lombard Odier and French investment manager Capital Fund Management, among others.

While public-private data partnerships have been favoured by larger institutions, the private sector of data providers is also booming.

Aggregating and interrogating sustainability data from disparate sources has proven to be a profitable, if not always fruitful endeavour for private companies, as investors spent more than $570 million backing startups in the first six months of 2021 alone, according to a report by PwC.

Meanwhile, data giants including MSCI, FactSet, MorningStar and others, have been expanding their own ESG data offering, either through in-house developments or acquisitions of specialist providers.

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