The PRI has worked with signatories on a new private credit (PC)-private equity (PE) ESG Factor Map. The Map aims to streamline the environmental, social and governance (ESG) information shared during the investment process. It is designed to facilitate collaboration between sponsors, co-investors and lenders and integrates existing ESG standards and frameworks.

Building on an original idea by two signatories[1] and drawing on extensive existing guidance regarding ESG best practices for private equity and private debt investors, this Map was originally envisaged to facilitate information gathering and sharing in the pre-investment phase of a deal. Most target companies, especially small- and medium-size ones, will not be able to address all the questions in it, but the Map can help set ESG goals for the companies and track and monitor progress towards them in the post-investment phase.

Importantly, the Map ensures that disclosure aligns with standard industry reporting frameworks, including the Sustainable Accounting Standards Board (SASB), the Loan Syndication and Trading Association (LSTA) ’s ESG questionnaire, the Task Force on Climate-Related Financial Disclosures (TCFD), CDP, the EU Sustainable Finance Disclosure Regulation (SFDR) ’s Principle Adverse Impact indicators, the Institutional Limited Partners Association (ILPA) ’s ESG Data Convergence Project indicators and the more recent Novata and e-Front.

The template can be easily adapted to investors’ existing proprietary ESG frameworks while offering other significant benefits as it:

  • Provides standardised minimum disclosure guidance to help private companies prioritise ESG data during the diligence phase;
  • Increases access to ESG data for a broader set of stakeholders, including lenders, co-investors, consultants, service providers and investment banks (to encourage the entire ecosystem to steward disclosure and better data and access); and
  • Reduces the number and variations of data requests among the nodes in the private markets investing eco-system.

The PRI intends to review this Map periodically as the industry evolves. We recognise that it is not one size fits all and can be used for different purposes. Indeed, the PRI has already started working with credit trade associations as part of the ESG Harmonization Credit Consortium to support material and consistent ESG disclosure within credit markets, taking the template’s cue to develop a harmonised ESG reporting tool for creditors.[2]

The PRI acknowledges that ESG consideration varies by investment strategy and that athough the data collection exercise is common among sponsors, co-investors and lenders, it represents only the first step of the incorporation of ESG issues in the investment process.

The Map is in excel format and contains:

  • Instructions for use
  • General company questions
  • Industry-specific questions
  • A framework mapping

For further information please contact [email protected].