Key findings from KEY ESG latest report "Making it Material – Granularity in ESG Reporting"

Private Market ESG assets are expected to skyrocket between EUR 775.7bn and EUR 1.2tn by 2025 -accounting for between 27.2 and 42.4% of the entire private market industry’s assets, according to a report by PwC. This is expected to result from private equity’s active engagement on ESG with its private market holdings.

Private equity’s active engagement with its portfolio companies makes it uniquely placed to drive sustainability. But to do so effectively, private equity firms must have the right data on which to base crucial ESG decision-making. This means, not simply relying on industry averages to fill gaps in an ESG report – but actually, working with the portfolio companies to get the granularity of data and insight. Often, this data is not readily available and private equity firms will have to build the data collection, reporting and disclosure processes across their portfolio to be able to deliver on their ESG promise.

To understand where the industry is in its journey to ESG performance, KEY ESG surveyed over 100 industry participants – primarily within the mid-market – including interviews with both GPs and portfolio companies, to understand where they were in their ESG journey, the drivers behind their firm’s move to manage and report on ESG, their views on evolving industry standards and the key challenges around gathering and reporting on ESG data.

In this we found several key findings:

Private equity funds, their Limited Partners, Portfolio companies and regulators will need to work together to overcome the challenges of knowing what to measure and how to report it.

But to really drive ESG impact, convergence in standards should not be the only point of focus. Private Equity firms can ensure that their portfolio companies do not only collect and disclose the ESG data to comply with certain regulations and standards, but that they collect data on those areas where portfolio companies have material impact. With a more advanced level of data granularity, private equity investors will be able to calibrate their decision-making around ESG matters. Better data can help the private equity industry deliver on its promise to improve ESG performance across its holdings globally.?

If you want to learn more, read our full report now!