Global investors back CDP’s ‘first ever’ private markets disclosure framework

Ten global investors have joined the launch of a new environmental reporting framework by the Carbon Disclosure Project which is aiming to help standardise private markets ESG reporting.

The Private Markets Pilot platform is a “first ever” initiative designed specifically for private markets managers to provide a benchmark to analyse and compare their portfolio companies and potential investments on like-for-like environmental performance, according to a CDP statement. CDP, a 20-year-old environmental disclosure organisation, said its new framework addresses the “trend towards the privatisation of high-carbon assets” and the “gap in transparency” for private markets investors.

“There was this whole blank space out there in private markets where nothing was being measured, so nothing was really being managed either, Claire Elsdon, joint global director of CDP’s capital markets group, told New Private Markets. “There hasn’t been this level of scrutiny coming from any third party. What’s happening now is being driven by the industry.”

The initial investor group that has adopted CDP’s new framework includes: Beach Point Capital, Coller Capital, Intermediate Capital Group, M&G, Neuberger Berman and Nuveen. Together, these investors, which represent around $2.3 trillion in assets, will seed the disclosure initiative with environmental data from 1,000 privately held companies in their portfolios.

Previous reporting by New Private Markets has shown the industry’s largest investors, both LPs and GPs, are implementing various reporting standards and frameworks into their investment management processes. While the industry initiatives vary, some frameworks such as the United Nations-supported Principles for Responsible Investment and the Task Force on Climate-related Disclosures have become more commonly used.

But the need for reporting standardisation has also been a common theme from private markets investors, which is something CDP’s new framework aims to address.

“The bulk of private equity and debt investments are in small and medium-sized entities that are planned to grow aggressively over seven years,” Elsdon explained. “Anyone with a financing relationship with a SME needs a simplified, streamlined disclosure process that still has rigour to it and extracts the most important data points that are comparable across sectors.”