How does ESG data impact stewardship?
When it comes to reference data in the investment chain, global regulators understand that operational risk as a key contributor to systemic risk. Faulty reference data was identified as one of the major contributors to operational risk in financial institutions leading to catastrophic financial loss.
Up to three quarters of the data used in financial transactions is reference data, it helps key counterparties to work together efficiently, be it prices, issuer data or corporate actions. Maintaining data integrity and consistency is therefore fundamental to improving the accuracy and reliability of financial transactions. But it’s not just the so-called “traditional investment” processes that rely on quality data. Reference data in the stewardship and voting context matters just as much, if not more given the global inconsistencies of sustainability and governance disclosures.
The cost of faulty reference data impacts asset managers and owners
According to analysis from management consultants Oxera, Accenture, Greenwich Associates and CapGemini, the risk to firms’ front offices from sub-optimal trading decisions due to faulty corporate actions is estimated to be €1.6 billion – €8 billion per year globally. Available data on the European fund management industry indicates that firms in Europe incur total actual costs in the region of €65m – €140m per year from losses due to faulty reference data. This would imply an annual loss of €300m – €700m to the fund management industry worldwide. [Source: Oxera/DTCC, Corporate Action Processing: What Are the Risks?]
Governance reference data and stewardship
ESG and shareholder voting research are said to be plagued by problems such as poor data quality, lack of global standards, data duplication, lack of automation and lack of investment in systems. Missing or misleading data can mean at the very least wasted time and effort looking for answers, at the worst, the wrong votes or investment choices.
Minerva- helping mitigate governance data risk
Asset managers face significant pressures from regulators and clients to improve their stewardship operations. Managing those challenges in a resource-constrained world is where data experts like Minerva can help.
Minerva is a global expert with over 20 years experience of sustainability governance data collection, consolidation, cleaning, analysis, co-ordination and distribution. Minerva helps asset owners and managers focus on the strategically important stewardship role of engagement by letting governance data experts provide the ingredients to support better decisions – and retain overall control of fiduciary responsibilities.
For a no obligation discussion about your governance data questions get in touch by using the form below or call us on +44(0)1376 503500