REIT ESG Data Improving in Quantity and Quality, But Standardization Issues Remain

REIT industry ESG data continues to improve both in quality and quantity, yet the lack of standardization remains a challenge, according to Bradford Stoesser, senior managing director and global industry analyst at Wellington Management.

In a REIT Report interview, Stoesser said REIT ESG data is “markedly better than even just a few years ago.”

“We are starting to see a proliferation of data providers and while more ESG data is a positive, quality and standardization are important, allowing for effective comparisons,” Stoesser said. He noted that companies largely self-report, meaning that transparency is often lacking.

Data providers, meanwhile, measure ESG differently and often are not clear in terms of the specific subcategories of E, S and G, and how they are measured, Stoesser explained. “The risk is that investors end up with very different impressions of a corporate’s ESG (information) based on the data they source,” he said.

Stoesser also noted that Wellington views ESG as “an evolutionary part of our investment process, both because we’re in the early days of its broad industry adoption but also because of shifts in data quality and availability.”

Turning to climate change, Stoesser noted that Wellington undertakes a thorough analysis of a company’s holdings and the potential risks to the portfolio. “Ultimately, our climate model seeks to understand to what degree climate risk is priced into individual security stock prices,” he said.

Stoesser will join a panel of experts to discuss ESG challenges and opportunities for REITs in a June 2 webinar hosted by Bloomberg Intelligence and Nareit.