ESG Data:
Why Now?
The ESG landscape is evolving rapidly with demand for data on the rise from investors and regulators. To remain competitive, GPs will need to be intentional about incorporating ESG into business practices and be agile in meeting changing expectations. It takes time to build an ESG strategy, and to be ready to report tomorrow, firms must start today.
of private equity firms have developed a responsible investing or ESG policy. Source: PwC
Globally, regulators are demanding greater transparency around how companies and funds incorporate ESG considerations and address sustainability concerns. In response, GPs are exploring how to report on new requirements from regulations such as the Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD).
ESG regulations differ by region and are evolving rapidly. Understanding the impact of existing and emerging mandates will ensure investors and portfolio companies are prepared for the challenges ahead.
See the ESG Regulations inthe EU and US at a Glance ↓
LP demands are also driving ESG integration among private equity firms. GPs globally have reported a rise in LP requests for ESG data. ESG data provides crucial insight into how a company is responding to emerging societal and climate risks, which have been shown to play a larger role in investment decisions. In 2021, half of the total fundraising flowed to firms with formal ESG policies, underscoring its growing importance in private markets. LPs have differing interests and priorities around ESG, making it crucial for GPs to account for each request to ensure firms are compliant.
of LPs would walk away from an investment because of ESG concerns. Source: Bain
of European private equity professionals said reducing their portfolio’s carbon emissions has positively impacted fundraising performance. Source: Simon-Kucher & Partners
What impact does the business have on the planet and local communities?
Are there social or environmental topics on which you’re interested in having a positive impact?
What ESG metrics are material to the business based on existing frameworks, such as the UN Sustainable Development Goals?
What industries are most common among your portfolio companies, and what impact do they have on the planet and local communities?
How might your portfolio companies already be incorporating ESG considerations in their business operations?
