The $487.7 billion California Public Employees' Retirement System and The Carlyle Group are leading a group of investors overseeing more than $4 trillion in assets to create a standardized set of ESG metrics and system for comparative private equity reporting.
Through this new initiative, called the ESG Data Convergence Project, general partners will track, gather and report on ESG data from their portfolio companies based on six metrics: scopes 1 and 2 greenhouse gas emissions, renewable energy, board diversity, work-related injuries, net new hires and employee engagement. GPs will then share this data with their limited partners and aggregate it into a benchmark overseen by Boston Consulting Group.
"Sustainability is a cornerstone of the CalPERS investment program. And yet, we have found it challenging to effectively measure impact in our private equity portfolio because of the multitude of frameworks and definitions used by GPs and LPs," said Marcie Frost, CEO of the Sacramento-based CalPERS, in a news release. "This initiative simplifies sustainability reporting by using comparable metrics which allow us to gain insight into the investment risks and opportunities in our private markets portfolio."
The goal of this project will be to provide more comparable portfolio information for LPs and allow GPs and portfolio companies to benchmark their current positions and accelerate improvements within their ESG efforts.
The group plans to meet annually to assess the prior year's data and to refine and build on these initial six metrics. The long-term goal of the project is to increase the quality and availability of comparable ESG data within private markets.
"We need to start a common language across all these participants so we can actually, in a sustained way, make some progress," Carlyle CEO Kewsong Lee said in an interview with Bloomberg. "By honing in on a set of common standards and common metrics, we start to standardize the conversations so we can really track progress. It's really hard to do that right now."
In addition to CalPERS and Carlyle, the investor group includes limited partners AlpInvest Partners; APG Asset Management, the in-house manager of the €523 billion ($613 billion) ABP, Heerlen, Netherlands; C$519.6 billion ($406.8 billion) Canada Pension Plan Investment Board, $10.3 billion Rhode Island Employees' Retirement System, Dutch pension provider PGGM, C$204.5 billion PSP Investments; The Pictet Group; Wellcome Trust; and general partners Blackstone Group, Bridgepoint Group, CVC Capital Partners, EQT, Permira and TowerBrook.
Mr. Lee added in an emailed statement that the group is encouraging more investors to join "because the more we can contribute our data, the more valuable this benchmark will become as we all strive to drive ESG improvements at our companies and generate long-term value together."