PGGM supports Private Equity ESG disclosure standard

These standards often focus on public markets, and it is becoming clear that private equity (PE) needs to catch up.

With this in mind, PGGM participated in the ESG Data Convergence Project, the first LP-GP partnership in the PE industry with the aim of raising the bar in ESG reporting. The ESG Data Convergence Project is a cornerstone in bringing sustainability in PE to the next level.

With the aim of standardising a core set of metrics for comparative ESG reporting, this project strengthens the GP-LP collaboration in tracking ESG performance. Comparable data tracking enables us to set meaningful targets in driving real impact.

PGGM’s ESG strategy
In response to the Dutch Climate Agreement and our clients’ climate ambitions, PGGM started to collect greenhouse gas (GHG) emissions data across the entire portfolio, including PE. This helps us identify a gap in terms of data maturity in the PE industry.

So far, we have been able to report on Scope 1 emissions data on 27 percent of the companies in our PE portfolio. You can read more in PGGM’s Private Equity Responsible Investment Report 2020. By supporting this LP-GP partnership, we are committed to further collaborating with LPs as well as engaging with our GPs to achieve full ESG transparency.

Private equity is changing
Earlier in the summer, the Institutional Limited Partners Association (ILPA) released its first framework which aims to help LPs evaluate and benchmark GPs’ progress on ESG integration. Participating as a working group member, we believe this framework helps to identify best practices around the ‘process’ of ESG integration.
The ESG Data Convergence Project will further strengthen that framework. Through standardized ESG data, it enables LPs to understand and assess the actual ‘performance’ of ESG integration of GPs.

A welcome start
The current set of six metrics includes Scope 1 and 2 GHG emissions, renewable energy, board diversity, work-related injuries, net new hires, and employee engagement. This is a great start to measuring ESG performance in a fast-moving, complex environment, but more needs to happen to keep PE in line with regulatory as well as societal expectations. PGGM has an ambition to screen our investments in 3D: return, risk and impact, and we need robust data to do so.

We are excited to see LPs and GPs collaborate towards a more sustainable PE market. PGGM will continue to play a role in driving more and better ESG disclosures through this LP-GP partnership.