The PRI’s Investor Data Needs Framework
The PRI’s Investor Data Needs Framework
Dr Rory Sullivan and Dr Ian Woods
Investors need decision-useful data to inform their investment decision-making, their engagement and their reporting. Standard setters and regulators tend to assume that ‘responsible investors’ are a homogeneous group with common data needs. The consequence is that disclosure standards, rules and laws often fail to address investors’ data needs.
“Driving meaningful data throughout markets’ is a key PRI Blueprint target. It enables the flow of high-quality decision-useful data from companies through the investment chain to inform asset owners’ and investment managers’ implementation of their responsible investment practices. However, investors regularly complain to the PRI about a lack of decision-useful corporate sustainability data.”
Over the past year, Chronos Sustainability has worked with the Principles for Responsible Investment’s (PRI’s) Driving Meaningful Data team to develop the Investor Data Needs Framework, which offers a structure to identify decision-useful corporate sustainability data for investors.
Based on extensive engagement with PRI signatories (one-to-one interviews, an online survey and an investor roundtable) and a comprehensive literature review, we have identified a series of high-level requirements (or criteria) to ensure that data is decision-useful for responsible investors. In broad terms, for data to be decision-useful it must be:
Available. That is, the data must be:
Produced (whether as raw data from companies or processed by data service providers).
Accessible to the investor (i.e. in a format that the individual investor can easily integrate into its responsible investment processes and its reporting).
Of sufficient quality. That is, the data must be:
A faithful representation of what the company intends to report.
Comparable across geographies and timeframes.
Verifiable by investors (e.g. through transparent disclosures, through third-party verification).
Relevant. That is, the data must be relevant to the investor’s decision-making processes and activities, and/or to the investor’s reporting obligations.
Figure ES.1: Investor Data Needs Framework (overview)
The framework delineates between the different responsible investment activities – research, valuation, portfolio construction, stewardship and investor reporting – and how data needs different between these activities. Importantly the framework also delineates between the different types of data, grouping these into:
Input data, which refer to data on the context (e.g., location and sector), the company’s processes (including governance, strategy and risk management processes) and the material ESG issues which will be identified through the company’s (or investor’s) materiality assessment;
Output data which measure the company’s operational performance and level of activity (e.g. production rates, number of staff).
Outcome date, which measure the effects of the operational performance on the business’s financial performance and on people, planet and the economy.
The PRI will use the framework to guide its engagement with standard setters and regulators, using the framework will help the PRI understand the breadth of its signatories’ data needs for corporate sustainability data, and to generate evidence to support its
Our view:
The PRI’s Investor Data Needs Project is hugely important and long overdue. For too long, debates around corporate sustainability reporting have been characterised by calls for more and more disclosures, without properly considering who the users of these data are or what they need from data. By explicitly considering how data are used by investors – acknowledging the wide range of investment strategies and applications – we hope that corporate reporting frameworks (be they produced by the public or the private sector) will generate the high quality, decision-useful information that investors need.
Notes:
1. For further information on the PRI’s Driving Meaningful Data programme, see: https://www.unpri.org/sustainability-issues/sustainable-markets/driving-meaningful-data
2. The report, Understanding the Data Needs of Responsible Investors: The PRI’s Investor Data Needs Framework can be downloaded from https://www.unpri.org/driving-meaningful-data/understanding-the-data-needs-of-responsible-investors-the-pris-investor-data-needs-framework/11431.article