How Aberdeen Standard Investments is tackling ESG data challenges

Martin Kwiatkowski, Investment Operations Director at Aberdeen Standard Investments, explains the benefits of global data standards and how the firm is tackling the challenge of unfamiliar ESG data sources.

Sara Benwell POSTED ON 4/30/2021 7:59:41 AM

Fund Operator: Do we need global standards or requirements for companies to disclose their ESG activities?

Martin Kwiatkowski: There are always helpful by-products of applying global standards. If you look at the conversations around ESG, some of it is around how you adapt your platform to accommodate all the data needs of ESG.

From this perspective, standards help because by their nature, they are all about harmonisation of data. When this happens, people are immediately then speaking the same language, which helps reduce complexity.

If one of the challenges that exists throughout the industry is how you incorporate all the needs of ESG into data and technology, clearly standardisation brings together partners in this space.

Whether you’re a technology firm or market data vendor, you end up working towards the same rules when it comes to codifying data. We have seen this to be beneficial to the industry over the years from a data perspective.

“There are always helpful by-products of applying global standards”

If you think back to elements like securities and the straight through processing side of things, this benefited massively from SWIFT being implemented.

Derivatives then became a big area post 2008, where the adoption of FPML increased significantly as the world became focused on derivatives related data.

This is where global standards can be beneficial, but this is more about data elements rather than what firms are being asked to disclose or not.

That’s another conversation for a different group of people.

Fund Operator: What are the challenges related to managing unfamiliar data sources related to ESG, climate change and carbon footprint?

Martin: In many things that we do in the buy-side space, it is increasingly about blending different data components. ESG is one of the more recent themes in this space.

If you look at any organisation from a digital perspective, clients increasingly want more detail on their portfolios – both breadth and depth.

They are the asset owners and the broader and deeper the requirements are, the greater the challenge becomes in putting together all of these data components to create the data views that meet their needs.

“This is fundamentally all about blending, mixing, matching, and integrating data”

These views will be essential to clients from a decision-making perspective, regulatory standpoint or because they need to have greater oversight of the assets that you are managing for them.

This is fundamentally all about blending, mixing, matching, and integrating data. This has been a constant challenge to the industry with the nature of the data that you are trying to mix and match, becoming broader and deeper over time. ESG adds to this challenge.

Fund Operator: What are the solutions to overcoming these challenges?

Martin: From a technology standpoint, one key area is having the right reporting tools and data architecture.

Some firms will have chosen to build their own. We have chosen to buy some of these services from key partners, alongside some internal data tooling.

With this approach, it gives us the ability to create the templates and be sufficiently agile on the data componentry that you can train into these.

It is always going to come back to the sourcing and availability of data to power the solution - the reporting tools are only going to be as good as the data you put into them.

One key question is: where do you capture all of this data from? There is a range of externally provided data. Market Data firms understand the value and importance of this data in both the investment manufacture and the subsequent reporting.

“We have chosen to buy some of these services from key partners, alongside some internal data tooling”

You must be able to find the right firms to get you the right data, at the right price point.

In some cases, you may have to blend it with your own data. For instance, we have some proprietary ESG scores. You then have to bring this data together into your enterprise data management solution and investment platform.

In many cases there will be well established firms offering solutions, but they will not necessarily be designed for ESG data at their outset.

It is all about working with these enterprise data management tools, and any other enrichment tools that you want to put around them, which will allow you to have a better and broader master data set.

 

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