CLOSE

FastTrack to becoming ESG ready

 

The European Commission has defined an ambitious sustainable roadmap towards Environmental, Social and Governance (ESG) with the end goal of achieving targets agreed at the Paris Conference of the Parties (COP21)1 by 2050. One of the significant regulatory changes taking place in the European Union (EU) is the implementation of the sustainable finance disclosure regulation (SFDR) which aims to increase transparency on sustainability, prevent ‘greenwashing’ and enable comparison for sustainable investment decisions. The regulation applies to financial market participants across all asset classes, including illiquid assets whose fund managers need to prepare for its Level 2 (periodic reporting) entering into force in July 2022.

Over the past couple of years, there’s been a significant shift in the private equity (PE) world about ESG strategies. According to PwC’s Global Private Equity Responsible Investment Survey 20212, 66% of respondents rank ‘value creation’ as one of their top three drivers for responsible investing or ESG activity, whereas ‘risk management’ was their biggest driver in 2019. Without doubt, more and more firms are starting to focus on ESG as their awareness of it continues to grow. However, the challenges to overcome in order to be ‘ESG ready’ are significant for PE firms.

In fact, most financial market participants (asset managers such as AIFMs and UCITS managers, pension funds, insurance companies and banks) and financial advisers (both investment and insurance) are under pressure to address demands around ESG criteria. Private markets, meanwhile, face their own set of challenges – one being the relative scarcity of data in general in the PE industry.

1Adopted by 196 Parties at COP 21, the Paris Agreement on climate change entered into force in November 2016 to limit global warming to well below 2°C, preferably to 1.5°C, compared to pre-industrial levels.

2 Global Private Equity Responsible Investment survey, PwC, July 2021.

Read on to learn how Intertrust Group can help you navigate the complexity, to become ‘ESG ready’.

What we are seeing in the market

According to the Global Impact Investing Network3, PE is the most common asset class in the impact investing industry and a strong portion of PE focused investors (86%) report that they are performing in line with or exceeding their financial performance expectations.

To date, more than 500 PE firms are signatories of the Principles for Responsible Investment network (PRI) and are already integrating ESG practices into their operations. And they have every reason to demonstrate their commitment towards responsible investing. A Bfinance report4 published in February this year revealed that 60% of asset owners are ‘unlikely’ to hire equities managers that are not signatories of the PRI.

There are some obvious signs that the market is transforming with ESG considerations at its heart. In April 2021, Morningstar Manager Research5 reported that European sustainable funds attracted inflows of €120 billion in the first quarter of 2021, which is 18% higher than in the previous quarter and represents 51% of overall European fund flows.

The environmental impact of Covid-19 lockdowns around the world, as well as evidence of climate change across the world, have increased public interest in sustainable investing. A recent study by Casey Quirk shows that investors are expected to drive $3.2 trillion net into sustainable strategies by 20256.

As the focus on ESG investment grows, PE fund managers need to start gathering complex qualitative data. From 2022 onwards, they will be required to provide multiple reporting frameworks and requests while also assessing their ESG risks and opportunities. Time is of the essence here. It’s imperative to start gathering ESG data now, to embrace the growing demand for sustainable investments and comply with the impending waves of new regulation in the coming years.

3 Global Impact Investing Network (GIIN), Impact investing decision-making: Insight on financial performance, January 2021.

4 ESG asset owner survey, how are investors changing, Bfinance, February 2021

5 Morningstar Manager Research, April 2021

6 It’s not easy being green. Managing authentic transformation within sustainable investing, Casey Quirk, a Deloitte business, 2021

How does it impact you?

Last April, the European Commission issued a comprehensive package of measures to help direct financial flows towards sustainable activities in the EU. Part of the EU Taxonomy regulation will come into force on 1 January 2022, so the clock is ticking for private fund managers headquartered or present in Europe.

With this EU regulatory push and an increase in investor demand, sustainable assets are on the rise and set to soar to $13 trillion (€10.9 trillion) globally by 20257. According to research from asset management consultancy Casey Quirk, Europe, the Middle East and Africa make up $9.5 trillion, or nearly three-quarters of these assets.

One of the first obstacles managers face when pursuing the opportunities in this growing market is gathering the relevant ESG data and running analytics.

Read more about our ESG data reporting

7 It’s not easy being green. Managing authentic transformation within sustainable investing, Casey Quirk, a Deloitte business, 2021

How we can help you

Intertrust Group is providing an end-to-end ESG data gathering and analytics solution to help you collect ESG data, analyse and benchmark ESG performance of your funds, and support the implementation of the required ESG measures.

We manage the collection of our clients’ data and their underlying portfolio investments to deliver real-time ESG analysis supported by our expertise and a secure, intuitive and flexible online platform. Our solution enables clients to assess the ESG performances of pre-investment target companies and aggregate this data according to multiple reporting standards.

Our services enable you to effectively oversee the implementation of ESG practices in your portfolio assets, acting as a central repository for ESG practices. We leverage market expertise in data management and reporting, capitalise on the experience gained from our large client base and provide you with a scalable, yet bespoke solution.

Our step-by-step solution includes:

ESG DATA COLLECTION: Collection of ESG performance data from clients and their third parties (e.g. portfolio companies, investments)

GHG EMISSIONS: Consolidate and compare GHG emissions of portfolio companies. Online powerful calculator allowing portfolio companies to calculate their own emissions

ANALYSING PERFORMANCE: Analysis of ESG performance of portfolio companies, clients’ funds or overall portfolios

BENCHMARKING: Ability to benchmark ESG performance of a portfolio asset against other assets within the clients’ portfolios or funds

MANAGING RISK: Collaborate with portfolio companies to identify areas of underperformance, assess ESG risks, define mitigation plans and follow up on their implementation

TRACKING PERFORMANCE OVER TIME: Tracking of portfolio companies’ ESG performance over time, including the impact of specific ESG projects and initiatives

VISUALISATION AND REPORTING: Online dashboards, data extracts and charts aggregated according to industry reporting standards for the clients to use in the preparation of their ESG reporting (GRI, SDGs, SASB, etc.)

Main client challenges. Our end-to-end solution response.

Fund managers have a need to collect ESG data that will enable further analysis, benchmark performance and identify gaps to fill on their ESG journey. Defining the steps needed to get there can be complex and requires specialist assistance.

All your ESG data at your fingertips

ESG data collection

Gather fund and portfolio information, and collect ESG data with complete control over all aspects of metrics, reporting, and scoring with a solution designed to enable collaboration with your portfolio companies.

Visualisation and reporting

Access data online through a secure business analytics solution, export any data for internal analysis and reporting. Manage analytics by portfolio, fund, status, sector, geography and company. Follow up on progress, identify opportunities and areas of improvement.

Managing risk

Identify and engage with portfolio companies and help them to improve areas of ESG underperformance. Set actions with deadlines, define and track defined projects and KPIs. Assess risks both at the company and aggregated levels.

Framework-mapped ESG library

Use the questions library to create a framework mapped questionnaire to cover all elements of ESG reporting. Frameworks include CDP, GRI, SASB, TCFD or SDGs as an example.

Our advantages

  • We support all three factors of ESG with specialized resources and expertise, allowing clients to focus on their core business.
  • We meet international standards and local requirements across the whole value chain, with a one-stop-shop approach.
  • We offer solutions that evolve with the ever-changing market and regulatory requirements, leveraging our expertise across 30 countries, so you can rely on up-to-date ESG data.
  • We help drive efficiency in the implementation of your ESG strategy, with a global delivery model, and a best practice technology-enabled solution.
  • We deliver transparency on ESG performance, enabling the active management of ESG KPIs and data to drive your decision making.

What makes us different?

We’re committed to the United Nations Global Compact and do business responsibly by aligning our strategy and operations with the UN Ten Principles on human rights, labour, environment and anti-corruption. The central theme in our ESG programme is ‘leading by responsible business practices’.

We’re ideally positioned to help you navigate the complexity.

Established in 1952, with over 65 years’ experience in expert administrative services.

4,000+ employees dedicated to providing world leading, specialised administration services to clients in over 30 jurisdictions. Amplified by the support we offer across our approved partner network which covers a further 100+ jurisdictions.

40 of the top 50 Private Equity International firms from PEI 300 are our clients. Our global and diversified client base comprises more than 8,000 client groups, servicing more than 57,000 entities.

We service more than 200 of the world’s largest private capital fund managers globally. We have unrivalled expertise across all private capital asset classes including debt, PE, real estate and infrastructure.

We’re committed to the United Nations Global Compact and do business responsibly by aligning our strategy and operations with the UN Ten Principles on human rights, labour, environment and anti-corruption

The central theme in our ESG programme is ‘leading by responsible business practices’

Americas, Europe, Middle East and Africa, Asia Pacific

Bahamas

Brazil

BVI

Canada

Cayman Islands

Curacao

USA

Belgium

Cyprus

Denmark

Finland

France

Germany

Greece

Guernsey

Ireland

Italy

Jersey

Luxembourg

Norway

Spain

Sweden

Switzerland

The Netherlands

UAE

UK

Australia

China

Hong Kong

India

Japan

New Zealand

Singapore

We can help you navigate the complexity and fast track your journey towards implementing ESG measures and become ‘ESG ready’.

Talk to our experts today

  • Please select all services you're interested in.