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Barriers to Using ESG Data for Investment Decisions

Author

Listed:
  • Bjorg Jonsdottir

    (Faculty of Business Administration, University of Iceland, Saemundargata 2, 102 Reykjavik, Iceland)

  • Throstur Olaf Sigurjonsson

    (Faculty of Business Administration, University of Iceland, Saemundargata 2, 102 Reykjavik, Iceland
    Department of Accounting, Copenhagen Business School, Solbjerg Plads, 2000 Frederiksberg, Denmark)

  • Lara Johannsdottir

    (Faculty of Business Administration, University of Iceland, Saemundargata 2, 102 Reykjavik, Iceland)

  • Stefan Wendt

    (Department of Business, Bifrost University, 311 Borgarnes, Iceland)

Abstract

Institutional investors who commit to integrating environmental, social and governance (ESG) aspects into investment decisions require ESG data of sufficient quality. However, concerns have risen over a lack of quality in ESG data, as outlined by the Global Reporting Initiative. The lack of quality in ESG data deters institutional investors from using the data for investment decisions. This study outlines the ESG data reporting process and explores where in the process quality concerns emerge. Semi-structured interviews are applied with professionals involved in ESG data analysis and reporting of listed companies, a rating agency and institutional investors. The results show that current barriers to using ESG data include a lack of materiality, accuracy and reliability. Interviewees agree that access to data collected by governmental institutions is lacking, and that companies’ purchase of carbon credits raise questions about the reliability of ESG data. Companies hold contrasting views to the institutional investors on the useability of the data they disclose. The results enhance our understanding of the common and contrasting concerns about the lack of quality in ESG data. The results can be used as guide for companies, investors and regulators for actions to mitigate barriers related to the lack of quality in ESG reporting.

Suggested Citation

  • Bjorg Jonsdottir & Throstur Olaf Sigurjonsson & Lara Johannsdottir & Stefan Wendt, 2022. "Barriers to Using ESG Data for Investment Decisions," Sustainability, MDPI, vol. 14(9), pages 1-14, April.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:9:p:5157-:d:801493
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    References listed on IDEAS

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    2. Defang Ma & Liangwei Li & Yuxi Song & Mengkai Wang & Qiaowen Han, 2023. "Corporate Sustainability: The Impact of Environmental, Social, and Governance Performance on Corporate Development and Innovation," Sustainability, MDPI, vol. 15(19), pages 1-16, September.
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