Navigating ESG data scarcity challenges in Private Markets

October 9, 2023 EcoVadis EN

Investing using ESG principles requires access to reliable, timely, and high-quality data about companies’ ESG performance—but investors often find that data hard to come by.  

While popular in public markets for some time, demand for ESG adoption has gained significant traction in private markets. Private equity (PE), venture capital (VC), and other private market participants increasingly recognize the value of integrating ESG principles into their investment strategies. A recent study by the United Nations Principles for Responsible Investment (UNPRI) also revealed that 75 percent of PE signatories assess ESG materiality for individual companies in their portfolios. Investor pressure from LPs and the evolving ESG regulatory landscape are compelling general partners (GPs) to measure the ESG performance of their portfolio companies. Furthermore, a report surveying over 300 limited partners (LPs) and GPs shows a shift towards an "ESG or nothing" investment philosophy, with over three quarters of respondents saying that they plan to cease investing in or promoting non-ESG private markets products by the end of 2025. However, limited disclosures from private companies and the lack of a consistent ESG data collection framework across the private markets make it challenging for GPs to track progress on material ESG goals.  

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About the Author

EcoVadis EN

EcoVadis is a purpose-driven company whose mission is to provide the world's most trusted business sustainability ratings. Businesses of all sizes rely on EcoVadis’ expert intelligence and evidence-based ratings to manage risk and compliance, drive decarbonization, and improve the sustainability performance of their business and value chain. Its AI-powered risk mapping, actionable scorecards, benchmarks, carbon action tools, and insights guide a resilience and improvement journey for environmental, social and ethical practices across 200 industry categories and 175 countries.

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