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Why Invest Europe is planning its own ESG reporting framework

The private equity association was in talks to cooperate with the Data Convergence Project led by CalPERS and Carlyle, but is now developing its own framework.

Private equity industry association Invest Europe is developing an ESG reporting standards framework for its members.

“We’re hoping we can develop a standard that is undeniably the standard,” Martin Bresson, public affairs director at Invest Europe, told New Private Markets. “Our members have been very explicit in asking us to develop an ESG standard.”

Invest Europe is not the first industry association to set ESG reporting standards, Bresson acknowledges: “Our members are finding the global ESG standards market very confusing and don’t know what to rely on. We’re not hoping to add to the confusion, we’re hoping to develop something that will clarify.”

Invest Europe will be launching its reporting standards into a marketplace in flux. Some of the dominant global frameworks for sustainability reporting have committed to consolidate in an effort to simplify a complicated landscape of competing and overlapping frameworks. In November, the IFRS Foundation announced the formation of the International Sustainability Standards Board, which will merge the Climate Disclosure Standards Board and the Value Reporting Foundation. The latter of these is itself a combination of two significant frameworks: the Integrated Reporting Framework and the SASB Standards.

Meanwhile, some significant private markets-focused initiatives have been launched in a bid to standardise reporting to limited partners. The Data Convergence Project, led by CalPERS and Carlyle, was announced in September 2021 and created in partnership with LPs and GPs representing assets worth over $4 trillion, including Blackstone, CVC, EQT and Permira. It involves GPs reporting on six ESG metrics in their portfolio companies.

In October, another consortium, including Hamilton Lane, S&P Global, the Ford Foundation and the Omidyar Network, launched Novata, “an independent, unbiased and flexible open architecture platform for the private markets to more consistently report on relevant ESG data”, the firm said. It is based around 10 metrics that “consistently appear across leading ESG methodologies”.

Said Bresson of the Invest Europe initiative: “The process is intended to be inclusive. We’re not going to reinvent the wheel. We’ll be leaning on and taking the best from the initiatives already out there. The Carlyle-led initiative – we had good discussions with them about whether there could be a cooperation,” but Invest Europe ultimately decided to develop its own standard in October 2021 following demand from its members.

Invest Europe’s framework will be unique because “we represent GPs and LPs, including venture capital and seed money”, said Bresson. Invest Europe is “the world’s largest private equity association”, according to its website.

The framework will be released in summer 2022 and will be available to members only, but Invest Europe will “hopefully share the methodology, the taxonomy and the thinking behind it” with non-members. Development of the framework will be funded via membership fees.

Further reading: Giant investors coalesce around ESG reporting frameworks