A lack of direction and clarity over what data to gather and report on has left GPs buried under a deluge of surveys, “all asking the same thing in slightly different ways”, said Zoë VanderWolk, investor relations and sustainability manager at ETF Partners, at the BVCA Summit 2022 in London last week.
A glut of templates have launched in recent years, leaving GPs struggling to sift through the wide range of overlapping iniatives and tools on offer. Having to answer “yet another survey” on data points “without any sense of materiality” has become increasingly burdensome for GPs, VanderWolk explained. “We are deluged with data requests. There is this ocean of data that we are trying to provide, but what is going on with that data and where does it go?”
Other panellists agreed that there needs to be less focus on data collection and more on data analysis and materiality.
Invest Europe’s new ESG Reporting Guidelines offers a potential solution to this. Launched last week, the guidelines promise a roadmap for GPs to understand what data to gather, how to assess materiality and how to develop an ESG policy. Martin Bresson, public affairs director at Invest Europe, told New Private Markets: “The guidelines contain a detailed mapping of existing voluntary international standards and frameworks, and of the pan-European regulatory framework, including practical guidance on how to comply with the EU Sustainable Finance Disclosure Regulation/Taxonomy Regulation and how to deal with the outstanding uncertainties.”
The ability for investors to gather consistent, standardised ESG data has been a fundamental concern and talking point for the industry for years. One significant development in this area has been the creation of the ESG Data Convergence Initiative, which encourages investors to align around a handful of ESG metrics and report on these annually. Since its launch last year, more than 215 GPs and LPs have signed up, representing an aggregated $27 trillion of assets under management and around 2,000 portfolio companies, according to the organisation’s website.
Invest Europe’s framework is different in that they “are not demanding that you sign up or pay either with money, service contracts or indeed by handing over your data”, Bresson explained. “The data gathered through the template is entirely for the use of GP/LP reporting; Invest Europe has no access to the data.”
Given the multitude of ESG frameworks already out there, New Private Markets asked Invest Europe why the industry would need another.
According to Bresson, compared to other initiatives, theirs “differs in almost every relevant way”.
“It is the only one that supports other reporting or data collection schemes,” Bresson explained. “If you make the best use of our guidance and put the guidelines to use – for instance by using the template we suggest – then you will automatically get the dissected data that you will need for your SFDR reporting… We have developed this, with the clear aim of being ‘best in class’ yet we have also recognised that we can be best in class and still be supportive of other initiatives that the industry cares about.”
Abrielle Rosenthal, chief sustainability officer at TowerBrook, believes there is room in the market for multiple ESG frameworks: “It is not practical to expect any one framework will be appropriate for all LPs or GPs.”
However, she told New Private Markets that Invest Europe’s framework is “the most comprehensive” one she has seen to date. “What is most helpful is that it has considered many of the other frameworks in the market and has attempted to pull them together and build them into its master framework. For GPs, that convergence is where we see these initiatives being the most useful.”
Others see multiple frameworks as problematic. Speaking at the BVCA Summit, Andrew Probert, managing director and head of EMEA ESG Advisory at Kroll, said: “Multiple frameworks could lead to a situation where companies can go ESG-rating shopping. If they don’t like the answer from one framework, they can try and get a better outcome with another.”