December 6, 2022 | Stamford, CT — Challenges with ESG data is hampering the integration of environmental, social and governance (ESG) metrics in fixed-income investing. 

Almost 85% of the fixed-income professionals participating in a new study from Coalition Greenwich say their firms are working to expand ESG capabilities. There is one major obstacle slowing their progress: difficulty obtaining high quality ESG data. 

Almost all the investors in the study say ESG plays a role in their fixed-income investment decisions, with about half describing that role as “very important.” Just 4% of investors do not consider ESG at all. Despite this strong commitment to ESG, only about a third of the investors have fully integrated ESG into their investment processes. 

“Although issuance of green and sustainable bonds is expanding fast and investors are recognizing the growing importance of ESG in fixed-income portfolios, in many cases, ESG factors are still considered on an ad hoc basis,” says Stephen Bruel, Senior Analyst for Coalition Greenwich Market Structure & Technology and author of Expanding ESG Capabilities – Improving Data to Advance the Journey.

A Troubling Gap 
The gap between where fixed-income market participants want to be with ESG (holistic integration of ESG into the entire investment process) and where they actually are (ad hoc implementation) is the focus of the industry. This gap is due to a variety of issues but according to study participants, the biggest problem they face is data. 

This is especially true for municipal bond and GSE investors, 64% of whom cite the lack of relevant data as the primary concern. Across fixed income, the top impediment is lack of ESG data at the issuer level, followed closely by the ability to quantify ESG risks. 

“These challenges are linked—if you lack ESG data at the issuer level, it will be difficult to quantify ESG risks,” says Stephen Bruel.

Expanding ESG Capabilities – Improving Data to Advance the Journey analyzes current rates of ESG adoption in fixed-income markets and how ESG is evolving among issuers and investors. The report also takes a close look at how fixed-income investors are applying ESG in their investment processes and portfolios, how a lack of high quality data is holding them back, and how investors are working to secure the data they need to evaluate and manage ESG risks.