With the launch of the ESG Data Convergence Initiative (EDCI), the sharing of ESG data has never been easier. However, Position Green commercial lead for investment monitoring Christopher Wallin believes there is still a long way to go until ESG data is perfect.
EDCI launched in 2021 and is a first of its kind effort from the private equity community to boost convergence around ESG metrics. This initiative has over 275 general and limited partner members, which have an AUM of around $25trn.
The mission of the partnership is to create a meaningful, comparable and performance-based set of ESG data from private companies. The initiative asks participating firms to report on a core set of ESG metrics drawn from existing frameworks. Categories included are greenhouse gas emissions, renewable energy, board and c-suite diversity, work-related accidents and more.
A GP then tracks the metrics for their portfolio companies and reports them in a standardised format. This data is then shared directly with invested LPs and aggregated into an anonymised benchmark by Boston Consulting Group.
As part of the EDCI, ESG software platforms can directly integrate with the data portal, enabling automated data reporting and validation.
Commenting on the initiative, Wallin said, “We at Position Green are proud to have this integration in place and to contribute to the automation processes for our clients. The goal is to streamline the reporting to the Initiative for the upcoming reporting period and for future disclosures.”
He added that private markets have struggled gaining access to underlying asset specific ESG data. This is intensified by the rising regulatory requirements and increasing demand from investors.
Due to these pressures, firms will need new ways of accessing data sets with a higher level of granularity, quality and transparency, as well as finding ways to compare performance for targeted actions.
Wallin said, “Integrating sustainability as a value creator in all parts of the investment cycle calls for a broader allocation of resources – both on an ownership level and across the underlying asset operations.
“Although there is a pressing need for a unified method to measure ESG factors and impacts, there is still a long way to go, especially regarding a reporting consensus across different asset classes. These asset classes represent unique challenges and opportunities that have to be accounted for on at least an industry and operational level.”
Position Green offers an integrated ESG offering that combines data-driven software with sustainability reporting software, investment monitoring, specialised advisory services, e-learning and executive training.
The company has seen a demand for flexible reporting processes caused by the changing landscape or regulatory and market requirements. Wallin explained that these customers find it difficult to assess materiality across diverse portfolios and expanding operations, as this requires a continuous process of assessment. He said, “The prevailing sentiment on the market is that the upcoming regulations will create a solid foundation that can be built upon.
“Many of our clients have a strong focus on creating more resilient portfolios and leveraging ESG as a comparative advantage, for example, during procurements. Position Green’s new collaboration with the EDCI will help streamline data submission to the Initiative and ensure accurate benchmarking as a springboard to improve performance.”
FinTech Global recently spoke to several players in the ESG FinTech space about greenwashing and how better data can combat it.
Tariq Desai – senior manager at ESG reporting company Position Green – said, “I’m quietly confident that greenwashing will reduce, maybe not near term but in the mid-term. There is going to be a period that, as transparent and traceable data is taken more seriously, more greenwashing allegations will emerge, and more companies may be implicated. But this is only a symptom of greenwashing being tackled and industries wanting to ensure high standards in ESG reporting and data collection.”
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