OECD demands better data on ESG investing

Governments and regulators should urgently work together to improve the data used for ESG investing, according to a new OECD report.

The OECD Business and Finance Outlook 2020 notes that as ESG investing has mushroomed in recent years, so has the different reporting methods, and relevant, comparable and verifiable ESG data is still lacking – preventing due diligence, management of risks, measurement, and the ability to align investments with sustainable, long-term value.

“Finance has a critical role to play in ensuring a truly sustainable recovery from the COVID-19 crisis that will create better and greener jobs, boost income and lead to more sustainable and resilient growth,” said OECD secretary-general Angel Gurría. “But finance can only deliver better environmental, social or governance outcomes if investors have the tools and information they need.”

The different methodologies used vary in scope and tend to have low transparency, with few generally accepted, consistent, comparable and verifiable indicators on which to base assessments. In practice, this means that a company might achieve a high ESG score from one service provider, and a much lower score from another (as the recent case of Boohoo illustrated).

According to the report the development of a common set of global principles and guidelines for consistent, comparable and verifiable ESG data is now a pressing need. The report also highlights other priorities for boosting ESG investing. These include putting in place guidelines to enable banks to scale up ESG integration and due diligence in their lending; the role state enterprise ownership should play in driving better ESG outcomes; and ensuring fiduciaries such as asset managers and boards better manage material ESG risk, including when investments are exposed to longer-term sustainability risks, as in the case of infrastructure financing.

Report here.

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