Making it Material: Granularity in ESG Reporting

Making it Material

Granularity in ESG Reporting

Focus on the data, not just the standard

Private equity's active engagement with its portfolio companies makes it uniquely placed to drive sustainability. But to do so effectively, firms must have the right data on which to base crucial ESG decision-making.

Investment firms and portfolio companies alike are facing hurdles when it comes to ESG data.

Businesses are scrambling to meet ever-changing standards respond to due diligence questionnaires and other time-sensitive matters. Yet, too many are struggling to access the granular data underpinning all of these activities, leading to uncertainty, inaccuracy and lack of impact.

KEY ESG has taken the temperature of the industry to understand where the problems - and solutions - may lie.

Surveying over 100 industry participants, including both GPs and portfolio companies, we learnt what the main issues are when it comes to ESG data gathering, the appetite for improved data access and where the areas for greatest improvement may lie.

This is what we found:

• 90% of portfolio companies assessed claimed to be unsure how to report on ESG data
• Many firms take up to 12 weeks to collect ESG data which can lead to missing reporting deadlines, stalling or failing deals at the point of sale
• 80% of fund managers find extensive esg questions from LPs detract from ESG improvement
• 70% of managers want to make sure to report on material factors and do this as part of their process

"What’s really important to us is making sure that we can actually understand the impact that a company has based on its strategy, its industry, its location. You can think about the broad brush of ESG performance, but every company is individually positioned to have their own impact."

Pollen Street Capital

Download the report to find out the state of ESG reporting in the PE industry.