ESG Reporting: GPs Move into a Faster Lane

In less than five years, ESG has gone from being a largely unfamiliar term to the subject of considerable investor scrutiny and regulatory oversight, with new US reporting requirements on the way.

Tom Gandolfo, Head of Sales & Relationship Management North America, recently spoke with Preqin for their 2022 Alternative Assets in North America Report. According to Tom, ESG is increasingly part of the private equity investment value chain process, and companies with strong ESG platforms can command a premium price in the market.

Companies can’t just give lip service to their ESG commitments, of course. To improve shareholder value, they have to provide considerable transparency into their ESG achievements. The challenge in North America is that ESG reporting is still evolving and is not nearly as robust as it is in Europe. Nor is it as consistent, making it difficult to compare metrics across companies.

According to Tom, the discrepancy is particularly pronounced in private markets where sourcing ESG data is more challenging. “Each alternative asset class has very specific needs and it’s difficult to create a one-size-fits-all approach,” he said. “Public markets have been providing ESG reporting for years but, as there’s no equivalent of publicly available financial statements in the private market, managers need to be more willing to share data.”

To learn more about upcoming SEC regulations, how ESG reporting is an added value for GPs, and the forces giving rise to ESG in North America, download his Preqin interview below or access it on the Preqin website here.