Improving borrowers’ environmental, social and governance reporting to lenders

Founding organisations: Alternative Credit Council (ACC), LSTA, Inc. (LSTA) and the PRI, with a group of leading private market investors

HQ country: Global

About the template

The Integrated Disclosure Project (IDP) template was launched in November 2022 by a group of leading alternative asset managers and industry bodies. The intention was to improve the transparency, comparability and accountability of environmental, social and governance data reporting.

The IDP template, based in part on the International Sustainability Standards Board’s (ISSB) SASB Standards, equips borrowers with a clear and substantive framework, enabling them to anticipate environmental, social and governance data requirements and engage effectively with lenders. The availability of the template has fostered an increase in the volume and quality of data reported to lenders. It has also proved an invaluable resource to support borrowers that lack significant reporting infrastructure.

The IDP offers advantages to all market participants.

• For investors: the IDP template enhances investors’ ability to identify industry-specific environmental, social and governance risks in their credit portfolios and compare data across alternative asset managers more consistently. The template includes a set of general, industry-agnostic questions which offer a baseline environmental, social and governance assessment of the borrower’s business, as well as industry-specific questions that have been sourced from the SASB Standards.
• For borrowers: the template gives borrowers greater certainty about which environmental, social and governance indicators are most relevant to lenders. This allows borrowers to concentrate their efforts on the most material disclosures, rather than spreading limited reporting resources thinly across a multitude of similar questionnaires.
• For credit fund managers: the template supports fund managers’ ability to engage with borrowers and issuers on disclosure, as well as to develop efficient investor reporting processes.

The IDP is led by an Executive Committee and an executive chair and vice chair, along with the Secretariat. Together, they:

• oversee the use and development of the IDP template to support consistent data collection from sponsored and non-sponsored borrowers across the private and broadly syndicated credit markets;
• develop supporting materials to raise awareness of the IDP template;
• promote the sharing of knowledge and sound practices among borrowers, lenders and investors;
• coordinate with stakeholders to support a harmonised approach to environmental, social and governance data.

The IDP is governed by a Secretariat composed of the Alternative Credit Council, the LSTA and the Principles for Responsible Investment.

In 2023, the IDP welcomed four credit-rating agencies (Fitch Ratings, KBRA, Moody’s Ratings and S&P Global Ratings) and the Investment Consultant’s Sustainability Working Group (a collaboration of 17 investment consulting firms) to the Executive Committee. In February 2024, Natixis Corporate & Investment Banking became the first investment bank to join.

The initiative has grown rapidly, attracting support from lenders across the world – who collectively manage US$7trn of assets – as well as from investors, industry bodies and credit rating agencies.

The IDP template was updated in 2023 to include additional data points (for example, the EU Sustainable Finance Disclosure Regulation’s principal adverse impact indicators) and to help promote consistent global disclosure standards. In connection with these updates, the IDP has partnered with Holtara, a leading provider of responsible investing advisory and technology services to maintain the template.

Other possible use cases

The IDP has been working closely with third-party data providers to develop tools and platforms which aid issuers or their representatives in the disclosure process. The list of service provider supporters includes: 9fin, ACA Group, Apex Group, Atominvest, Auquan, BuildESG, Dasseti, Diginex, eFront, Liminal Data, MSCI, Nasdaq, Novata and Ropes & Gray. For example, MSCI recently launched Private Company Data Connect, a centralised hub that leverages the template to provide general partners with access to private companies’ sustainability and climate data and disclosures. Similarly, Novata launched a framework to enable financial market participants to collect environmental, social and governance information outlined under the IDP.

Other work to broaden the applicability of the template includes collaborating with the Global Real Estate Sustainability Benchmark to cover real assets.

The template establishes a global baseline of environmental, social and governance information that covers both qualitative and quantitative data on those environmental, social and governance factors which are most material to lenders. Market participants have identified a number of use cases for the IDP, including:

• due diligence at the origination of a loan
• borrower engagement
• portfolio monitoring
• investor reporting processes.

The completed template can be used by primary and secondary trading market participants to support their investment analysis. Fund managers may also use this data to meet specific reporting obligations placed on them by their investors and to comply with regulatory requirements.

The IDP was designed to be accessible to borrowers. A chief objective of this work has been to ensure that the data requested can realistically be provided by businesses of different sizes, including small to medium enterprises. Borrowers are further encouraged to use this template as a guide when planning and developing their reporting capacity. For example, one of the unique aspects of the template is the sequencing of questions based on investors’ current and future expectations. The template has core general questions (which reflect current investor expectations), optional general questions and industry-specific questions (which may focus on aspirational investor expectations). Borrowers are encouraged to complete as much of the template as they can, with flexibility to expand their reporting capacity over time.

This harmonised approach is already supporting consistent environmental, social and governance data disclosure, tackling what we view as one of the greatest challenges to integration of environmental, social and governance factors in the private and broadly syndicated credit markets.

PRI disclaimer: This case study aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. It is written by a guest contributor. Authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories.

IDP Disclaimer: The Secretariat and Executive Committee of the IDP have provided the information contained in this case study for reference and discussion purposes only, and such information is not intended to, nor does it, offer or contain legal advice. Neither the Secretariat nor the Executive Committee of the IDP represents or endorses the accuracy or reliability of any advice, opinion, statement or other information contained herein. Readers of this case study acknowledge that any reliance upon any such advice, opinion, statement, or other information (or the effect of any of the foregoing) shall be at their sole risk.