The race to adopt an industry standard ESG template is advancing, with the ESG Data Convergence program enlisting its 100th member. Entities managing $8.7 trillion in assets are signatories to the data-sharing effort designed to find a common basis to report and collect portfolio company progress on environmental and governance goals.
That represents rapid growth for the consortium led by Carlyle Group and California Public Employees’ Retirement System. Just in September, their ranks included limited and general partners managed less than half that sum.
“ESG priorities will be and should be different for each company,” said Julia Jaskólska, Lead of Environmental, Social and Governance (ESG) and Co-Investments, Calpers Private Equity in an interview with Mergers & Acquisitions in December. That makes the job of limited partners harder, however, with respect to evaluating portfolio company progress as funds use different metrics to gage success.
The search for a definitive framework to measure portfolio company progress toward ESG goals is on, but growing toward that target introduces risks of its own. There is a risk that private equity could develop several different standards across disparate industries, said Institutional Limited Partners Association CEO Steve Nelson late last year. ILPA has developed an assessment rubric of its own for members to evaluate the progress portfolio companies are making on ESG metrics.
Still, with the industry’s largest funds now collating data in the Carlyle/CalPERS effort, there is a sign that momentum could be building for a single standard. Apollo, Ares, Goldman, and Oaktree Capital are among the newest contributors to the effort.