Private Equity Might Be Moving the ESG Reporting Needle

Over 70 private equity firms have signed an agreement to collect and report data on emissions, workplace fatalities, and gender diversity on the boards of companies contained in their portfolios. This move could help push regulatory talks forward in Washington, reports Bloomberg.

The initial group committing to data gathering was created by the California Public Employees’ Retirement System and Carlyle Group Inc. and has since seen firms such as Oaktree Capital Management, Apollo Global Management, and Ares Management Corp. join. The private equity industry is notorious for cost-cutting and adding debt to companies, and the move could bring transparency and a provision of proof that these companies can be profitable while minding their sustainability and social costs.

“We want our LPs to hold us accountable for our ESG outcomes, and having a common set of metrics facilitates that,” said Priya Prasad Bowe, head of ESG at Oaktree.

The coalition has agreed to standardize how ESG reporting is done, something that lacks any type of guidance or regulation from Washington for now. Included with the 70 private equity firms that have joined since fall of last year are almost 40 institutional investors as well, bringing assets of the group to $8.7 trillion.

With such a sizable portion of private equity, it should provide more clout in Washington regarding ESG reporting and standardization with regulations. Last March saw the acting SEC Commission Chair Allison Herren Lee asking for input from the industry as to the disclosures private companies were making regarding their climate practices and data.

Members of the group will be collecting various ESG metrics that have been agreed upon, such as certain types of emissions, and then a third party will collate the data and create benchmarks from it. They have also created an investor template for requesting the information from asset managers, with Bloomberg LP being a provider of ESG data. If people want any changes to be made to the ESG metrics, a majority vote would be required.

“We would hope other investors take the cue from this exercise, and are asking the important questions in their own way,” said Dan Rueven, principal of Kenneret Group.

State Street Global Advisors offers a number of ESG-focused funds with a variety of strategies and exposures. Funds include the newly launched SPDR S&P SmallCap 600 ESG ETF (ESIX), the SPDR Bloomberg SASB Developed Markets Ex US ESG Select ETF (RDMX), and the SPDR Bloomberg SASB Emerging Markets ESG Select ETF (REMG).

For more news, information, and strategy, visit the ESG Channel.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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