‘Building large scale, data-driven portfolios is still challenging’

As a result, Klier added that building large scale, data-driven portfolio models is still challenging.

For example, analysis by the ESG data and technology provider shows a 10 per cent correlation between the GRI {global reporting} Standards and the UN Global Compact.

“The things that people need to report to comply with the GRI, and the things that people need to report to comply with the UN Global Compact - there’s a 10 per cent overlap,” said Klier.

“And with the mushrooming of ESG data requirements and reporting standards, companies are increasingly confused/frustrated that what they’re being asked is not aligned.”

While Klier noted positive developments, such as the European Sustainability Reporting Standards becoming the dominant standard in Europe, and the ISSB standards consolidating previous sustainable initiatives, he said that data requirements are still inconsistent and fragmented.

Citing an analysis of 10,000 companies, Klier said: “Most companies (92 per cent) report on their board setup. The majority of listed companies (55 per cent) disclose scope 1 and scope 2 emissions - I think 55 per cent actually is quite encouraging.

“This starts to drop off when you get to something like scope 3 emissions (33 per cent) and water stress (4 per cent). The figure I find particularly striking is that less than 2 per cent of the 10,000 largest companies have a comprehensive TCFD report.”

Nevertheless, Klier said there was significant awareness among companies that they need to prepare more data. “Companies are definitely gearing up for this. The clarity on what is required is still a big concern and frustration, and therefore I think the data availability is still very fragmented.”

But besides data disclosed by companies themselves, Klier highlighted the importance of unstructured data, such as from news outlets, NGOs and social media. “Because quite often, what the world says about a company is even more important than what a company says about itself,” he said.

Chloe Cheung is a senior features writer at FT Adviser