Death and taxes are often cited as the only real certainties in this world. To these I would add discussions about ESG data.
Any serious discourse about sustainability in private markets – whether that be ESG or impact – invariably boils down to data: the gathering of it, the reporting of it, the integrity of it.
Securing a credit facility with an ESG-linked margin ratchet? The choice of metric and reliability of the data is critical. Investing in an impact fund? Measurement and reporting of outcomes is key. If an LP wants to factor a new consideration into its investment processes, such as neurodiversity, then the starting point is working out how to source the right data, something Hamilton Lane tells us it is doing at the moment.
The decarbonisation of our economy, for all the technological and industrial revolution it requires, is in large part a giant exercise in carbon accounting. As we heard from Rhyadd Keaney-Watkins, head of ESG for Arjun Infrastructure Partners, this week: the scarcity of quality greenhouse gas data means “we are flying in the dark.”
Without universally accepted, quantitative ESG data, “we end up with a lot of ESG stories”, says Julia Jaskólska, co-investment and ESG lead for CalPERS Private Equity. Jaskólska, speaking to us for a short film made in collaboration with 52 Digital, says that, while these stories are real – and they matter – “it is impossible to make sense of stories at scale”.
However, in the quest for a shared way of communicating ESG performance, progress is thankfully being made.
Invest Europe is the most recent organisation to enter the fray; it recently launched ESG reporting guidelines that promise a roadmap for GPs to understand what data to gather, how to assess materiality and how to develop an ESG policy.
Meanwhile, the ESG Data Convergence Initiative is more than a year into its effort to coalesce private equity investors around a small selection of ESG metrics and has started to churn out some benchmark data.
These and other initiatives have got industry participants feeling bright about a future with widely adopted data standards. “We are at a moment in history where it is actually starting, and it’s pretty exciting to see how it is going to develop,” says Cyril Gouiffès, head of social impact investments at the European Investment Fund, in our film.
Like death and taxes, ESG and impact data will always be on our agenda. Hopefully, though, we’ll soon be discussing what the data tells us, rather than whether it exists.