What is the ESG Data Convergence Project?
The project is the result of leading global General Partners (GPs) and Limited Partners (LPs) joining forces to create a standardised set of ESG metrics and a mechanism for comparative reporting.
What’s the project's objective?
The Project's objective is to create a mass of meaningful, performance-based, comparable ESG data from private companies by approaching a standardised set of ESG metrics for private markets. This allows GPs and portfolio companies to benchmark their current position and progress towards ESG improvements. For LPs, on the other hand, this can provide greater transparency and more comparable portfolio data.
To achieve this goal, companies participating in the project have agreed to report on a core set of ESG metrics in six categories of KPIs drawn from existing frameworks. The categories include greenhouse gas emissions, renewable energy, board diversity, work-related injuries, net new hires and employee engagement.
Why is the project necessary?
The lack of standardised, comparable ESG data, the increasing number of tailored ESG data requests, complex ESG frameworks and missing data on ESG performance in private investment markets significantly increase the workload of GPs, LPs, and portfolio companies. That’s why market participants are in the need of a critical mass of meaningful ESG data in a single framework and ESG benchmarks for the private market. To build such a critical mass of data, retail investors need to settle on a small number of ESG KPIs from mainstream frameworks that are available at the same time each year, with the same definitions and with standard normalisation factors for the underlying portfolio companies.
Who can participate in the project?
All private investors, who agree to support the principles of the work, can join the project. Stakeholders in the private markets' industry are encouraged to work together to collect better decision-relevant ESG data to gain deeper insights into ESG factors to make progress on critical ESG issues.
What does it mean to be a part of the project as a General Partner (GP)?
For GPs, participation means expanding their own data collection system to include the six categories of KPIs and the widest possible compliance with the ESG Metrics for Investors. It is advisable to keep a reporting handbook and to set up an investment strategy (ideally by means of a predefined template). Furthermore, the KPIs should be made available to LPs upon request while encouraging them to participate in the project. By April 30 of each year, the data must be submitted to the central aggregator. Participants should agree to be publicly associated with the efforts of the project. If they wish, they may volunteer to serve on the GP/LP Steering Committee for the annual sprint.
What does it mean to be a part of the project as a Limited Partner (LP)?
If LPs have relevant/overlapping ESG data requests to GPs, they are encouraged to change the definitions to align with the 6 categories of the project. Moreover, they are expected to promote additional industry efforts to drive convergence of ESG data requirements and encourage underlying GPs to join the project's efforts. In addition, they should agree to be publicly associated with the effort and may volunteer to serve on the GP/LP Investment Managers Steering Committee for the annual sprint.