Clearlake, Hellman & Friedman and Microsoft’s CIF back Novata

Partners from Clearlake and Hellman & Friedman are the latest to invest in ESG software and services. They are participants in ESG data company Novata’s $30 million funding round, alongside Microsoft’s Climate Innovation Fund, Kohlberg and Co., Vistria Group and founding investor Hamilton Lane.

The ESG financial software and services space has already been explored by the likes of Blackstone, CVC, KKR, Brookfield and Insight Partners.

Clearlake, Hellman & Friedman, Kohlberg and Hamilton Lane, who invested capital through partners and managing directors or from their balance sheets, have backed the company because “we are solving a problem that they know very well”, said Elizabeth Meyer, Novata’s chief legal officer.

This investment is a sign that demand from private equity firms for the service Novata provides will continue to grow as firms meet increasing ESG data and reporting requirements, added Josh Green, chief operating officer. “Their needs are growing. Private equity investors that are a bit more risk averse are also investing [in this space] because they see this as an enduring trend,” Green told New Private Markets.

Other participants in the funding round include Canson Capital Partners, Lindsay Goldberg, the Ford Foundation, S&P Global and Novata’s founders.

“Investors are interested in growth,” said Green. “Technology is a growth vector. ESG is a growth vector. Novata sits at the intersection of these.”

Launched in April 2022, Novata provides ESG data management software for private companies and portfolio managers. It launched a benchmarking tool in November 2022 using public and private companies’ ESG performance data and industry estimates. Among its clients are Silver Lake and Vistria Group, sources at these firms have told New Private Markets.

Asked whether clients should be concerned about data privacy and protection, given the number of private equity investors and managers that have invested in Novata, Meyer said: “There’s no way that rival private equity funds will have access to any data they could reverse-engineer to give them privileged insights into their peers.”

Other notable investments in the ESG financial services space:

• Blackstone invested in ESG software company Sphera in 2021
• KKR acquired environmental consultancy ERM in 2021 from Canadian pensions the Ontario Municipal Employees Retirement System and the Alberta Investment Management Corporation
• Brookfield, Insight Partners, Canada Pension Plan Investment Board, Quantum Energy Partners, Energy Impact Partners and Frontier Venture Capital participated in a $111 million investment round into carbon accounting company Project Canary
• CVC invested $200 million in sustainability ratings service EcoVadis SAS in 2020, investing via its second growth fund
• Palatine Private Equity’s first impact fund made a minority investment in Anthesis in March 2021

Editor’s note: This article has been amended to reflect that some private equity firms invested through partners and managing directors and some through balance sheets.