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Investors need to start ingesting ESG factors in their overall value proposition to remain relevant, according to Simone Vroegop, head of investor services strategy for Europe and Asia at Brown Brothers Harriman.
“ESG has gone from a hype to the biggest revolution where virtually all stakeholders are attributing strategic importance to sustainability issues,” she said, speaking at this year’s Finovate Spring.
“Our clients have really recognised that prioritising ESG initiatives is critical for managing risk, attracting and retaining top talent and adapting to the ever-changing marketplace.”
Corporates should not be put off by the ESG data challenges as they will remain a challenge in the future, according to Vroegop.
“We’re definitely faced with the challenge of managing the confusing variance in ESG data. The constraints border mainly on inaccuracy, non-alignment and unavailability. I do not encourage anybody to delay market entry or setting up ESG funds and wait for greater perfection, as the ESG data challenges will be part of the ESG landscape now and into the future.”
ESG is no longer a set of values but a driver of value to LP businesses, said Joel Brightfield, principal at SixThirty Ventures, a venture firm.
“I think the landscape has shifted from it being kind of a product value proposition to really being a driver of value within how our money is managed and how we advise clients.”
Investors spent nearly four times as much on responsible investment in 2020 compared to 2019, according to the Investment Association.
Fintechs will help drive data maturity in the ESG market, said Vroegop.
“Cloud-enabled API-first fintechs, which crowdsource raw data by leveraging AI from multiple sources, including social media, can really complement the consolidation, aggregation and visualisation of accurate, timely, independent and look through ESG data.
“I don’t think the data is looking to mature towards convergence, but rather will continue towards diffusion in the years to come. The winners in the market will be those who manage and intellectually assess the available ESG data in a differentiated way.”
Matthieu Soulé, head of C Lab Americas at BNP Paribas said new regulatory pressure is driving ESG maturity in the US.
“The new administration is pushing a lot with regulatory pressure. A lot of the players are starting to acknowledge that they need to change.
“A few of the largest banks in the US created a consortium with a think tank to work on sustainable finance. It’s a sign that the industry is starting to act on it. But we are still in the very early days, I think it’s a very promising space for many start-ups in the area in either the US or Europe.”
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