The Alternative Credit Council (ACC), the Loan Syndications and Trading Association (LSTA) and the Principles for Responsible Investment (PRI) are joining forces to align lenders and private equity sponsors to support material and consistent ESG data disclosure within the credit markets.
This effort was kicked off last year by the PRI - which is supported by the United Nations and represents signatories with over $120 trillion AUM - to standardise ESG information shared during the investment process. The PRI worked extensively with a group of signatories to develop an ESG pre-investment due diligence template for target portfolio companies. The template maps the many existing ESG standards and frameworks rather than adding to them. Through this work, the PRI has been able to highlight common questions and synergies across different frameworks.
The template is in its final stages and the PRI will release it later this spring, once feedback from PRI signatories, LSTA and ACC has been incorporated. It is ‘one size’ but investors can use it to fit their needs, depending on their role in the investment chain.
Today the PRI, LSTA and ACC are announcing an additional step to develop a harmonised ESG reporting tool for creditors. This tool will enable the consistent collection of data from sponsored and non-sponsored borrowers across the private and broadly syndicated credit markets.
This project is ambitious, and its success will require collaboration across all market stakeholders. The PRI, ACC and LSTA invite more organisations to join this endeavour to promote long-desired industry convergence in company reporting.
Carmen Nuzzo and Peter Dunbar, Head of Fixed income and Private Equity, respectively, at PRI commented: “We are pleased to see that the collaborative work that we initiated last year is coming to fruition and encouraging industry convergence. One of the main issues around monitoring and reporting in private markets is that there are multiple competing frameworks. We are at a tipping point and call on the owners of those frameworks to work with us, the LSTA and the ACC to drive harmonisation.”
Tess Virmani, Executive VP and Head of ESG at LSTA, said: “The LSTA is thrilled to be working with our partners on this important project. The broad uptake of the LSTA’s ESG Due Diligence Questionnaire demonstrates that participants in the credit markets recognize the need and are ready for ESG reporting. Harmonization is the critical next step in improving the availability of consistent, reliable ESG information.”
Jiří Król, Global Head of the Alternative Credit Council, commented: “ESG data availability and consistency is a key challenge for private credit managers and we hope that, through this open and collaborative process, we will be able to create a global platform to support this growing segment of private markets. We are extremely pleased to be partnering with the LSTA and UN PRI on this vital initiative and hope to work closely with other interested parties.”
Acting Head of Press
Profile Advisors for LSTA
Associate Director, Research and Communications
Notes to editors:
About Principles for Responsible Investment:
The Principles for Responsible Investment (PRI) is the world’s leading proponent of responsible investment. Supported by the United Nations, it works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole. Launched in New York in 2006, the PRI has grown to more than 4,800 signatories, managing over $120 trillion AUM. For more information visit www.unpri.org
About the LSTA:
The LSTA is a not-for-profit trade association that is made up of a broad and diverse membership involved in the origination, syndication, and trade of commercial loans. The 575 members of the LSTA include commercial banks, investment banks, broker-dealers, hedge funds, mutual funds, insurance companies, fund managers, and other institutional lenders, as well as service providers and vendors. The LSTA undertakes a wide variety of activities to foster the development of policies and market practices designed to promote just and equitable marketplace principles and to encourage cooperation and coordination with firms facilitating transactions in loans. Since 1995, the LSTA has developed standardized practices, procedures, and documentation to enhance market efficiency, transparency, and certainty. For more information, visit www.lsta.org.
About the ACC:
The Alternative Credit Council (ACC) is a global body that represents asset management firms in the private credit and direct lending space. It currently represents 250 members that manage over US$600bn of private credit assets. The ACC is an affiliate of AIMA and is governed by its own board which ultimately reports to the AIMA Council. ACC members provide an important source of funding to the economy. They provide finance to mid-market corporates, SMEs, commercial and residential real estate developments, infrastructure as well the trade and receivables business. The ACC’s core objectives are to provide guidance on policy and regulatory matters, support wider advocacy and educational efforts and generate industry research with the view to strengthening the sector’s sustainability and wider economic and financial benefits. For more information, visit www.lendingforgrowth.org