ESG For Investors: 3 Lessons from BlackRock
What is the biggest challenge investors face when evaluating ESG? How can business leverage ESG to engage investors. And what is the missing ingredient?

Three things I learned from this excellent conversation with Sasja Beslik and Tariq Fancy on ESG investing.

It’s all about data

Investors face a critical challenge in the realm of ESG investments – the lack of comprehensive data. Without access to the necessary data, investors struggle to make truly informed decisions. Value lies in providing investors with the data they need to evaluate a businesses ESG performance. The outcome for business is stronger relationships with long-term investors.

Disaggregated ESG ratings

ESG ratings are simple to understand but hard to make an actionable investment decision on: at a minimum ratings should be disaggregated to highlight the underlying data. Disaggregating minimum ratings to highlight underlying data is crucial. This approach enables investors to delve deeper. The goal should be to turn ratings data into actionable decisions.

The financial impact of non-financial data

Non-financial data like ESG risk exposure driving financial performance is only loosely correlated. By addressing the data gap, we equip investors with the necessary insights to evaluate and assess the impact of non-financial factors on financial outcomes. Which takes me back to point one.

One more thing…

The one point that really didn’t chime was the need for ESG to target the real economy instead of the capital markets (which lag the real economy). We are already witnessing companies build ESG strategies and disclosing their progress as a way to engage new pools of capital. Alignment of business process with investor interests is only a positive outcome – and one that would be welcomed by any investor I’ve met who is usually frustrated with the lack of data on which they are expected to make investment decisions.

Investors unquestionably want better data – it gives them an edge into unpriced risk or value. In reality, most investors in the private capital markets are still learning what data actually is worth uncovering. Most companies are willing to share better data if they can see it will attach better long term investors.

From this common understanding new outcomes for businesses and investors will emerge.

It all starts with a conversation.

 

Listen to the podcast that inspired this post. 

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