Private Equity Industry Establishes First-Ever LP and GP Partnership to Standardize ESG Reporting
September 30 2021 - 7:00AM
Leading global general partners (GPs) and limited partners (LPs)
today announced the creation of the ESG Data Convergence Project to
advance an initial standardized set of ESG metrics and mechanism
for comparative reporting.
The California Public Employees’ Retirement System (CalPERS) and
global investment firm Carlyle (NASDAQ: CG) led the collaboration
which includes GPs and LPs representing more than $4 trillion in
AUM. The group includes LPs: AlpInvest Partners, APG, CalPERS, CPP
Investments, Employees’ Retirement System of Rhode Island, PGGM,
PSP Investments, The Pictet Group, Wellcome Trust; and GPs:
Blackstone, Bridgepoint Group Plc, Carlyle, CVC, EQT AB, Permira,
and TowerBrook.
The group’s objective is to streamline the private equity
industry’s historically fragmented approach to collecting and
reporting ESG data in order to create a critical mass of material,
performance-based, comparable ESG data from portfolio companies.
This will allow GPs and portfolio companies to benchmark their
current position and accelerate progress toward ESG improvements,
which the group believes drives better financial outcomes. This
will also enable greater transparency and provide more comparable
portfolio information for LPs.
GPs will track and report six metrics from their underlying
portfolio companies, beginning with calendar year 2021. The data
will be shared directly with invested LPs by GPs and aggregated
into an anonymized benchmark by Boston Consulting Group (BCG) for
this first cycle. The initial six metrics are: Scopes 1 and 2
greenhouse gas emissions, renewable energy, board diversity,
work-related injuries, net new hires, and employee engagement.
The group plans to meet annually to assess the prior year’s
data, and to refine and build on these initial metrics,
prioritizing materiality. This collaboration is intended to be a
long-term mechanism to increase the quality, availability, and
comparability of ESG data in private markets.
Marcie Frost, CalPERS CEO, said, “Sustainability is a
cornerstone of the CalPERS investment program. And yet, we have
found it challenging to effectively measure impact in our private
equity portfolio because of the multitude of frameworks and
definitions used by GPs and LPs. This initiative simplifies
sustainability reporting by using comparable metrics which allow us
to gain insight into the investment risks and opportunities in our
private markets portfolio. Managing these risks and opportunities
is essential to fulfilling our fiduciary duty to provide retirement
security to our 2 million members. Collaboration between the GP and
LP community is the foundation, and we look forward to building out
this important work.”
Peter Branner, Chief Investment Officer at APG Asset Management,
said, “On behalf of clients, APG has long been driving ESG
transparency in private equity as a way to secure accountability
for responsible investment performance in the asset
class. Through this collaboration, we expect to push towards
comparable ESG performance measurement and wider adoption of ESG as
an integrated objective of PE investments. APG will use the metrics
in its engagement with managers. While APG's ambition goes beyond
the six metrics identified by the ESG Data Convergence
Project, we are excited by the momentum generated, with data
collection by PE managers already underway.“
Eric-Jan Vink, Head of Private Equity at PGGM, said, “Since
2020, PGGM has actively collected portfolio company GHG emissions
data, enabling us to report Scope 1 emissions data on 27% of the
companies in our private equity portfolio. By supporting the ESG
Data Convergence Project, we are committed to achieving full ESG
transparency. The current set of six metrics is a great starting
point, and we expect more as the field develops. In Europe, we see
that additional ESG disclosures are required under the Sustainable
Finance Disclosure Regulation already. PGGM, as a member of the ESG
Metrics Steering Group, will play a role in driving the private
equity market towards making more and better ESG disclosures.”
Steve Nelson, ILPA CEO, said, “ESG has become a core
consideration for many LPs when evaluating private market
commitments both because of the need to align organizational
priorities and from an investment resiliency and return
perspective, but to date LPs have lacked a standard set of metrics
for assessing their ESG objectives. ILPA believes such convergence
is a necessary ingredient for industry-wide progress and supports
initiatives aimed at streamlining existing frameworks that are
fit-for-purpose and flexible enough to adapt as the market and
investor needs evolve. In service of these objectives, we are proud
to include these resources as a part of our ESG Roadmap, which is
comprised of a variety of helpful ESG-related resources for the
private equity industry."
The partnership is open to any GPs and LPs that wish to join and
agree to support the principles of the work. The effort encourages
private equity industry stakeholders to work together to gather
better, decision-useful ESG data in order to generate deeper
insight into ESG factors and their relationship to financial
outcomes, and, ultimately, to drive greater progress on critical
ESG issues.
Click here to learn more about this initiative and how to get
involved.
Media Contacts
CarlyleBrittany Berliner+1 (212)
813-4839brittany.berliner@carlyle.com
CalPERSMegan White+1 (916)
795-3991newsroom@calpers.ca.gov
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