Thierry Adant, chief investment officer of Newmarket Capital, told New Private Markets today that the firm’s cost base has “increased significantly” because of the need to report impact performance, as investors continue to push for higher levels of ESG disclosure.
During an onstage interview at PEI Media’s Partner Connect East conference, Adant said: “Reporting has increased the cost base in terms of employees but also in terms of data providers, and there is a level that can become too much. That could be a point where it becomes frivolous, but it isn’t yet where we’re at right now.”
According to its website, Newmarket Capital is a Philadelphia-based impact-focused private assets manager that “underwrites bespoke investment solutions” targeting social issues, such as affordable housing, and the environment, including renewable energy development and energy-efficiency integration.
Adant’s comments spoke to the evolving expectations for managers to back up their commitments to invest sustainably and equitably with higher levels of disclosure on how their portfolios impact people and the environment.
New Private Markets reported in June that, across global markets, GPs are increasing disclosures based on industry guidelines offered by a widening array of framework organisations. In some cases, managers are taking ESG reporting in-house by developing their own approaches to measurement and disclosure.
Regardless of their approach, some managers have voiced frustration at a growing stack of ESG questionnaires that more investors require as part of due diligence processes.
The increasing amount of ESG disclosures are creating more work for investment managers. However, Adant added that it was also creating an opening for firms to differentiate themselves in the market by helping investors better understand how their capital is making an impact and showing their commitment to transparent investing.
“Certain levels of disclosure for private market investors might not be conducive but can be a competitive advantage,” he said. “We guard some of our impact features quite closely. We only disclose them to our investors.
“Most of the secret sauce for investment managers is [about] risk management. There’s a closely guarded secret around how we think about [risks].”
Adant joined Newmarket Capital in December 2020 after spending nine years at Willis Towers Watson, where he headed the insurance and investment firm’s private debt strategy.
He said the investment case for ESG-linked credit opportunities is that capital can be focused on “a few areas that make a real-world difference” and with the potential to generate higher risk-adjusted returns.
“This is not about values,” Adant said. “This is about profit maximising and focusing where we should be, and that is where the best opportunities exist.”