Even so, the exercise revealed several useful insights and trends regarding the progress PE-owned companies are making toward their ESG goals, and how their progress compares with public companies. In response to these challenges, over the past 12 months, the ESG Data Convergence Initiatives member GPs have begun voluntarily sharing ESG data on their portfolio companies. However, as the data also reveals, there is clear evidence of the power of this investment model in driving rapid, meaningful improvements in ESG. (See Exhibit 3.). for Diversity, Equity, and Inclusion (DEI) data at both the Privately owned portfolio companies have also been making strong progress on reducing their greenhouse gas emissions. For March 02, 2022 | Publication Shareholders have been a major force in driving attention to ESG issues at public companies. With ESG topics top of mind for many stakeholders, companies will be increasingly focused on driving progress in these areas. Industry Specific. The initial results show progress, but there is still much work to be done. They also share their priority research and engagement topics for 2023. been in force since March 2021, additional requirements will be the Institutional Limited Partners Association (ILPA): https://ilpa.org/bain_esg_report_22/, Posted 11 April 2022 by Alex Merola, Executive Director of Commercial Strategies, ESG & Private Markets, S&P Global Market Intelligence. Pay particular attention to Scope 1 emissions (a companys direct emissions, such as owned vehicles) and Scope 2 emissions (a companys indirect emissions, such as purchased electricity/steam consumption). Learn more about our ESG collection and reporting solutions for If you are an IPO aspirant, is addressing climate risk part of your planning process? While this lags public companies, the percentage of women on boards at private companies is growing faster than at their public counterpartsand the gap is narrowing. Among the findings: So far, the GP members of the ESG Data Convergence Initiative have provided data on nearly 2,000 private companies in their investment portfolios. (Sustainable Finance Disclosure Regulation) reporting, which seeks We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation. Technology, Media, and Telecommunications, environmental, social, and corporate governance (ESG), How Private Equity Can Catch Up on Diversity, Six Steps to a Sustainability Transformation, How Asset Owners Can Go from Net Zero to Climate Leadership, How Private Capital Can Harness ESG to Generate Alpha, Crafting Xella Groups ESG Strategy for the 2020s. ESG impact and effective ESG operating models | McKinsey In this article, we describe the ESG data challenges the private equity industry faces, the process behind our efforts to drive progress on both data collection and actual ESG performance, and the results of the ESG Data Convergence Project to date. Emissions disclosures present a prime example of GPs mobilizing to produce transparent and quantifiable ESG data. Board gender diversity. Other teams may hold different views and make different investment decisions. In our view, understanding and incorporating material ESG factors as early as possible enables more informed and strategic business decisions for the year ahead. and value creation. LPs, in turn, cannot benchmark the ESG performance of different funds. Measuring a companys resilience to long-term, financially relevant ESG risks. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. The more private equity stakeholders can work together, the more data, stronger insights, and better answers we will have to answer for the ESG questions that matterand the more progress the field can drive on meaningful ESG issues. The benchmark provides insights into the varying uptake of renewable energy to date across the world, with Europe, the Middle East, and Africa substantially further ahead than Asia-Pacific or the Americas. Climate Change and Sustainability, This highlight reel offers a quick tour of topical themes in the private markets, from IPO activity to biotechnology trends to ESG engagement. trajectories over time. 1Source: National Association of Corporate Directors, 2022 Private Company Board Practices and Oversight Survey. BCG X disrupts the present and creates the future by building bold new tech products, services, and businesses. Further, 73 percent of US respondents say they have adopted ESG for strategic reasons such as competitive advantage and lower cost of capital and not because of pressure from regulators. How to Address ESG Data Scarcity for Private Companies Principal Investors and Private Equity, makes it almost impossible to compare results among companies using different data collection and reporting schemes. Private equity firms can also make rapid progress toward improving their portfolio companies performance in the areas measuredpotentially even faster than their public counterparts. (See Exhibit 2.) Respondents who say they work for organizations with at least $1 billion in annual revenues are nearly 1.7 times more likely than those at smaller organizations to say environmental topics outrank social and governance . This is not a new framework or standard; its about harnessing the collective energy of investors to converge on existing ESG metrics. Please consider the publish date while reading these older pieces. LPs and investment managers have historically been unable to see meaningful, performance-based, and comparable ESG data across their portfolios. Embedding this into your overall corporate strategy with the appropriate tone from the top will prevent this from being a siloed climate effort, addressed ad hoc and separate from the business. (See Exhibit 1.) Taking a company public can be challenging especially when it comes to ensuring you are compliant with SEC financial reporting requirements. The platform provides private companies the ability to create a free ESG reporting framework, allowing them to showcase their efforts to key stakeholders. private markets, or obtain a "best practice" review with our Novata Raises $21M for its ESG Platform for Private Companies US Deloitte Private Audit & Assurance Leader, Partner - Audit & Assurance | Deloitte & Touche LLP, Telecommunications, Media & Entertainment, Do Not Sell or Share My Personal Information, A framework for assessing regulatory mandates, Sustainability standards for private companies, ESG opportunities and risks to potential investors. T-Bills trade higher in the repo markets as uncertainty takes hold, Navigating the Challenges and Nuances of Hedging in SA-CVA, As market volatility continues to dominate, watch our webinar replay to hear an analysis of the global landscape, i https://t.co/LX1ZG9k2fX, European banks are preparing to deliver onmassive share buyback plansand repayhundreds of billions of euros in c https://t.co/Fuk0oIPvd6, The Nature & Biodiversity Risk dataset can be used to support reporting in line with the Taskforce on Nature-relate https://t.co/k263V3gbXH, As institutional investors, many look to insurance firms to aid with the transition to a low-carbon economy. Discover a unique culture of collaboration and debate. Sustainable Finance and Investing, Boston Consulting Group 2023. Well discuss: With more than 30 years of audit and accounting experience, Kirsten Vosen serves as the Audit & Assurance Private leader, focused on strategic growth in the private segment. Asking the better questions that unlock new answers to the working world's most complex issues. The SECs proposed climate disclosure rule released in March 2022 is designed to give investors a more thorough understanding of the implications of climate change on the operations of publicly held companies. The goal: to converge on a standard set of metrics, drawn from existing market-leading ESG frameworks, that GPs and LPs can use to collect and compare their portfolio companies ESG datametrics consistent enough to establish meaningful benchmarks against but flexible enough to allow room for continuous improvement. Yet less than half of private company boards assess ESG-related risks and opportunities.1 In 2023 and beyond, we will continue to work with our portfolio companies to proactively tackle their distinct ESG issues. And portfolio companies cannot prioritize their own ESG efforts without a clear understanding of their optimal impact and value. ESG data providers turn attention to private companies For private companies approaching the public markets, we highlight the corporate governance best practices that can help pave strong relationships with public market investors. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ontario Municipal Employees Retirement System (OMERS), British Columbia Investment Management Corporation (BCI), California Public Employees' Retirement System (CalPERS), Employees Retirement System of Rhode Island, Investment Management Corporation of Ontario (IMCO), New York State Common Retirement Fund (NYSCRF), Norinchukin Zenkyoren Asset Management(NZAM), San Francisco Employees' Retirement System (SFERS), University of Pennsylvania, Office of Investments. NEW YORK, N.Y. (May 31, 2023) - KPMG and Workiva Inc. (NYSE: WK) announced an expanded collaboration to facilitate ESG reporting. To prepare for this new world, private companies especially those considering an IPO should immediately begin moving forward on three key elements. Can hedge funds fill the role of fixed income? You can manage your subscription using the links provided in any of our subscription emails. Developing All rights reserved. The Limited Partner Steering Group included: AlpInvest Partners, APG, CalPERS, CPP Investments, Employees Retirement System of Rhode Island, PGGM, PSP Investments, the Pictet Group, and Wellcome Trust. Tanay works with clients in consumer, hospitality, and private equity to grow and adapt during periods of rapid change and uncertainty. reveals that most LPs' (70%) investment policies include an ESG But by creating alignment around consistent, meaningful categories of ESG metrics that are relevant across all sectors and regions, the initiative anticipated that GPs would be able to more effectively work with their portfolio companies to gain the expertise needed to report on their ESG progress regularly. The ESG landscape in private markets is constantly evolving. As more GPs and LPs join in this collaborative approach, the data will become even more useful and the insights even stronger. portfolio companies can easily and accurately measure. Next, prepare for detailed emissions collection and reporting per the Greenhouse Gas (GHG) Protocol standards, the widely used global greenhouse gas calculation standard, which in many important ways aligns with the SECs proposed GHG emissions disclosure requirements. Finally, prepare to report on how climate change is impacting financial performance. Human capital management for private companies. All rights reserved. (See Exhibit 4.) Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you. For professional, institutional, or accredited investors only. Start with a modest but meaningful set of metrics that your The bottom line for private company leaders is simple: Regardless of your IPO intentions, the time is right to begin thinking about climate reporting and how it fits into your long-term business strategy. How do you move long-term value creation from ambition to action? The ESG Data Convergence Initiative (EDCI) Steering Committee announced on March 1 the formalization of Boston Consulting Groups role as the initiatives long-term benchmarking and advisory partner, with an initial term of three years. ByLorenna Buck,Jim Brennan,Vinay Shandal,Michael Brigl,Greg Fischer,Maike Stoffers, andMarielle Remillard. 2 Others, such as greenhouse gas emissions, are more challenging to measure accurately. This starts with evaluating if and how climate impacts your companys business model today and how a transition to a lower carbon economy will impact your business model. Lauren is a partner in Deloitte's Accounting & Reporting Advisory practice. The categories include greenhouse gas emissions, renewable energy, board and C-suite diversity, work-related accidents, net new hires, and employee engagement. This has come to fruition, with more than 80% of portfolio companies submitting data for the majority of the mandatory metrics. The data would be shared with participating LPs invested in the underlying funds in a standard format to enable comparability across their GPs, and it would be centrally aggregated by a neutral third partyfor the first year, BCGto create relevant benchmarks and to drive research. approach. The ESG Data Convergence Initiative, cochaired by CalPERS and Carlyle, was formally launched in the fall of 2021 and is supported by BCG as a neutral partner. Some are tied to specific business models, some collect only publicly available data, and some depend entirely on qualitative answers to questionnaires. We continue our "ESG insights for private companies" series by exploring ESG materiality assessments, including why they are important and how to conduct one for your private company. For more information about our organization, please visit ey.com. 2 In addition, Kirsten serves as the Partner in Charge of Private Company Matters in the National Office Audit Group at Deloitte & Touche LLP. She also has significant experience with registration statements and complex transactions with a real estate focus. (See the sidebar Methodology.). This compares very favorably to the progress being made by their publicly owned peers, which have increased usage far less over the past two years. As the adage goes, what gets measured gets managed. Quantitative data can help identify areas where improvement is needed, provide incentives to improve, and track progress over time. With our decades of experience helping companies go public, we can help you get ready for the big day and beyond. With nearly 2,000 privately owned portfolio companies, this benchmark draws on the most comprehensive ESG database that has ever existed in the private markets. Five Reasons Private Companies Care About ESG - The Conference Board These initial metrics were chosen according to the following guidelines: For the most part, the metrics chosen adhere closely to these guidelines. BCGs research reveals six key success factors and the steps companies need to take today. This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global. This pilot dataset was dependent on the availability of comparable historical ESG data; as such, it is less complete and robust than the 2021 and future data will be. And how does their progress on ESG link to their financial results? Even if the SEC doesnt require IPO companies to make climate disclosures when they go public, investors likely will. Source: Business Wire, November 2021. Related Expertise: Forward-thinking entrepreneurs and private business leaders should pay close attention to this issue and begin making changes now to prepare for a future of more transparency. Review the climate expertise of your board and senior leadership team and if necessary, bring in talent with the background and knowledge to help build a culture that is focused on transparency around emissions reductions. your disclosures with the best available data now will make ]}, Discover more about S&P Globals offerings, , Executive Director of Commercial Strategies, ESG & Private Markets, S&P Global Market Intelligence, Corporate Actions & Securities Processing 2023 EMEA User Group Forum, Sustainable Datacenters: The Intersection of Innovation and Lifecycle Design, How to Adapt to Digital Disruption in Financial Services: Driving change through digital experiences and flexible data delivery. This article was originally published in ESG Today- Guest Post: Private Companies are Facing a New Era of Climate Transparency - ESG Today. Archived pieces remain available on the site. Mark Segal February 4, 2021. This finding is consistent across geographies and industries and indicates that private equity firms can be very effective job creators across their portfolios. If disclosure rules were enacted today, how would you need to respond? While any third-party data used is considered reliable, its accuracy is not guaranteed. SASB standards identify the sustainability issues most likely to S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. Who | The EDCIs members include 300+ GPs and LPs representing ~$26 trillion in assets under management. In addition, a number of investment advisers and consultants are aligned with the effort. No matter their starting point, BCG can help. Lauren spent two years in Deloitte's National Office Accounting Services group focused on leases, business combinations, and consolidation, and is a current member of Deloitte's National On-Call Accounting Advisory group. The SASB Engagement Guide provides If you are interested in learning more: Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. Where is your company today in terms of emissions, and where do you want to be in five or 10 years? PE firms that can deliver are reaping the rewards. Being able to furnish timely and quality information that is aligned with sustainability standards can allow companies to effectively communicate their sustainability metrics to potential investors. To learn more about these topics, visit our ESG insights for private companies homepage. Insurers' biggest climate alliance is losing members in droves. But the number has grown quickly since then, doubling to 12% in 2020. The value of your investment may become worth more or less than at the time of original investment. For example, the private companies in the benchmark use significantly less renewable energy than public companies. (See Exhibit 2.). Greenhouse gas (GHG) emissions disclosure. Boston Consulting Group is an Equal Opportunity Employer. ESG has become a leading indicator for success andis increasingly a factor in assessing private companies.1, 2. As the world grapples with increasingly pressing energy security and climate change considerations, we anticipate that businesses in all geographies will be looking to increase their usage of renewables. This is indeed what the initial evidence from the benchmark shows. The private equity industry has a critical role to play in helping our society tackle climate change and other major challenges. In the typical private equity investment model, firms maintain both ownership and control, with a long-term mindset. Complete the benchmarking agreement for 2021 on the above website and submit it via secure link. Certain services may not be available to attest clients under the rules and regulations of public accounting. WELLINGTON MANAGEMENT is a registered service mark of Wellington Group Holdings LLP. Please see www.deloitte.com/about to learn more about our global network of member firms. Transformation guide. Contact the ESG Data Convergence Initiative with any questions at, Download the data guidance and standard reporting. He focuses on helping his clients grow through developing strategies that address buy, sell, build, or partner growth options, followed by diligence and potential restructurings. The bill ( S.B. The Expanding Case for ESG in Private Equity | Bain & Company when they become required. remember settings), andPerformance cookies to measure the website's performance and improve your experience., and Marketing/Targeting cookies, which are set by third parties with whom we execute marketing campaigns and allow us to provide you with content relevant to you. In these roles, she has a passion for helping clients and teams solve challenges related to ESG reporting and strategy, bringing a multi-functional perspective considering data, process, internal controls, and technology enablement. She is also the Accounting & Reporting Advisory ESG Leader, helping organizations think about ESG in the context of reporting and an evolving regulatory environment. The technical storage or access that is used exclusively for anonymous statistical purposes. Once they decide to begin tracking meaningful ESG data, private equity firms can move quickly, significantly increasing disclosure rates among their portfolio companies. Depending on your industry and operations, emissions tracking and data collection can be a complex, time-consuming effort. This helps ensure that when funds turn their attention to ESG issues, they can maintain their focus and promote changeby measuring the ESG indicators that matter, establishing clear targets, working with management to ensure improvement, and tracking progress over time. information matters more than ever, but sourcing ESG data from Respectively, the Sustainability Accounting Standards Board, Global Reporting Initiative, Science Based Targets, CDP Global (formerly known as Carbon Disclosure Project), Taskforce on Climate-related Financial Disclosures, Principles for Responsible Investing, United Nations Sustainable Development Goals, European Union Sustainable Finance Disclosure Regulation, and the World Economic Forums International Business Council. Of course, its important to note that those private equity funds that have been tracking this data over time are also likely to be funds that are particularly engaged on ESG topics, which introduces a selection bias for comparisons with the public markets. And this is only the beginning. We believe that private equity can be a responsible home for underperforming assets, including those divested from public companies, and that it can make the necessary multiyear investments to improve portfolio companies emissions intensity as well as their financial outcomes. Complete 2021 data collection by April 30, 2022. Our mission is to create a critical mass of meaningful, performance-based, and comparable ESG data from private companies. Moreover, the median private company in our dataset with at least one woman on its board saw higher revenue growth relative to the median private company with no women on its board across 2018-2019 and 2019-2020. For institutional or professional investors only. Insurers Targeted by State Anti-ESG Efforts in Texas and Beyond The Challenge Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact. GRESB (Global Real Estate Sustainability We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. Establish a climate vision and develop appropriate policies and procedures that support your strategic objectives. What | The ESG Data Convergence Initiative is an open partnership of private equity stakeholders committed to streamlining the private investment industrys historically fragmented approach to collecting and reporting ESG data. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. facilitator.1 KPMG and Workiva Collaborate on ESG & Climate Data This is an excerpt from our 2023 Investment Outlook, in which specialists from across our investment platform share insights on the economic and market forces that we expect to influence portfolios in the year to come. Other teams may hold different views and make different investment decisions. In response to the challenge, a group of some of the worlds largest GPs and LPs, representing more than $4 trillion in assets under management, has come together over the past several months to collaborate on a solution, with BCG supporting in the first year as a neutral partner and By . The Performance Advantage. Our hope is that a consistent, meaningful range of ESG metrics will encourage and enable GPs to work effectively with their portfolio companies to gain the expertise needed to maintain and report on their ESG progress regularly. Real estate, hospitality and construction. However, this does not detract from the fact that private equity can be an effective model for driving positive change. Data collection can also require investments in technology and tools. Leaders face an uncertain landscape. internally collected data to respond to regulatory and investor Companies seeking investment will likely be pulled into the realm of ESG reporting. Many privately owned companies are newer to making progress on ESG topics than publicly owned companies. On the other hand, these private companies have been highly effective at creating new jobs in recent years. The key is to stay aware of developments, especially around the SEC rule, and do a materiality assessment of how business could be impacted. performance within a standardized and globally recognized Article1 from ESG & Sustainability Outlook, Focusing on sustainability value opportunities. PGGM, as a member of the ESG Metrics Steering Group, will play a role in driving the private equity market toward making more and better ESG disclosures.. The General Partner Steering Group included: Blackstone, Bridgepoint Group, Carlyle, CVC, EQT AB, Permira, and TowerBrook. Investors Voice Dismay Over Corporate Data Clash: ESG Regulation year-over-year comparisons easier and more useful for investors DTTL and each of its member firms are legally separate and independent entities. US markets cop calls out regulatory gaps in investment funds. These initial results suggest three key early insights into the role of private equity in promoting ESG goals among private companies: The many benefits of consistent, standardized, regularly measured ESG datafor GPs, LPs, and their portfolio companies toocannot be disputed. New Data Shows How Private Equity Stacks Up on ESG October 12, 2022 By Ben Morley , Vinay Shandal , Lorenna Buck , Chris McIntyre , Michelle Amory , Roger Linares Arroyo , Zahra Husain, and Ben Baxter An unprecedented effort by private equity firms offers data-driven insights into the progress private companies are making against their ESG goals. 4 reasons why private companies need an ESG strategy Regardless of the sophistication of your environmental, social, and governance (ESG) program, the pace of change regulators have proposed may require private companies to take a fresh look at their own readiness.
Inglot Duraline Sephora,
Code 10 Driving Jobs In Sasolburg,
Does Episoft Actually Work,
Articles E