Key Impact Points:

• 62% of respondents struggle with the quality and coverage of ESG data.
• Regulatory requirements are the top driver for ESG adoption (25%).
• Managing multiple ESG vendor feeds is a significant issue for 31% of respondents.

A Bloomberg survey of over 150 market participants from the banking, insurance, securities, and technology sectors who attended the Bloomberg Sustainable Finance Forum in Shanghai revealed significant insights into the drivers and challenges of embracing ESG data in China.

This survey follows Bloomberg’s European ESG Data Trends Survey announced earlier in the year where unsurprisingly, fulfilling regulatory requirements was a higher priority for European firms to access ESG data (35%).

Key Drivers for ESG Adoption: The leading reason for adopting ESG data within organizations was regulatory requirements, cited by 25% of respondents. This was closely followed by the demands of onshore clients (21%) and offshore clients (21%), and internal risk management (22%). These findings highlight the multifaceted reasons for integrating ESG considerations into investment strategies, driven by both external pressures and internal risk assessments.

Use-Cases for ESG Data: Chinese market participants are embedding ESG considerations into their decision-making processes in various thoughtful ways. Key use-cases include:

• Focusing on third-party ratings, scores, or related research (20%).
• Impact investing (19%).
• Building quantitative strategies that utilize ESG data alongside other financial considerations (18%).
• Addressing climate risks (16%) and biodiversity (9%).

Challenges with ESG Data: A significant challenge identified by nearly two-thirds (62%) of respondents was the extent and quality of company-reported ESG data. Combining ESG data with alternative data was the second biggest challenge, cited by 26% of respondents. Additionally, managing multiple ESG vendor feeds posed a significant challenge for nearly one-third (31%) of respondents, a stark contrast to the 16% in Europe who identified this as a key issue.

Managing ESG Data: Linking ESG data to existing entity/instrument data was another significant challenge, with 35% of respondents highlighting this issue. These challenges indicate that while there is a growing interest in ESG data, there is still a need for standardized ESG data reporting to ensure financial market participants can fully leverage this information.

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Patricia Torres, Global Head of Sustainable Finance Solutions at Bloomberg, commented on the findings: “There is a growing synergy between the demands of investors and regulatory drivers when it comes to the use of ESG data for Chinese market participants. Now, more than ever, the firms that are building capacity to incorporate and thoughtfully manage ESG data as part of their investment decision-making processes will have a positive point of difference. There is every indication that the role of ESG in China’s financial markets will continue to grow in importance over time.”