KPMG is a proud supporter of the Sustainable Markets Initiative’s Private Equity Taskforce. Together, we have produced “ESG Metrics in Private Equity,” a practitioner’s guide to the use of ESG metrics.
The Sustainable Markets Initiative (SMI) was launched at the 2020 World Economic Forum Annual Meeting in Davos by His Majesty King Charles III, then The Prince of Wales, as a network of global CEOs across industries working together to build prosperous and sustainable economies that generate long-term value through the balanced integration of natural, social, human, and financial capital.
In conjunction with the SMI, the SMI Private Equity Taskforce was formed in 2021 as the first-ever CEO-level private equity working group established to discuss ways the industry can effect change. This taskforce—comprising many of the world's leading private equity firms—leverages expertise from each member firm across three priority areas, including climate change, biodiversity, and ESG-related metrics.
Introducing ‘ESG Metrics in Private Equity
The metrics working group, a subgroup of the wider SMI Private Equity Taskforce, has produced a new cross-industry report, “ESG Metrics in Private Equity,” that offers a fresh perspective and reflects a dynamic way of thinking about the effective use of qualitative and quantitative insights derived from ESG-related metrics. The report also considers how measuring and monitoring these metrics, alongside financial metrics, will further help drive resilience, growth, and value in private markets.
About the report
The ‘ESG Metrics in Private Equity’ report, which leverages deep industry insights balanced with practical recommendations, has been written around the following three constructs:
Data: ESG data is an important aspect of investment analysis and portfolio company management in private markets.
Materiality: A materiality lens will help private equity firms (GPs), investors (LPs), and portfolio companies leverage specific ESG metrics for value creation and risk mitigation—focusing on the most significant levers for a company in a specific sector.
Structure: Private equity offers a structure to facilitate data collection and active engagement to further sustainable development in private markets.
Designed to be used by all stakeholders in private equity—general partners, limited partners, and portfolio companies, the report is divided into the following key sections:
- Use cases considered and key ESG themes
- Understanding the integration challenges
- Introducing materiality in private equity ESG metrics
- Step 1 - Private equity materiality considerations
- Step 2 – Industry-specific materiality considerations
- Step 3 - Baseline, developing, and advanced practices and expectations for ESG metrics in private markets
- Focusing on what ESG metrics to collect and why
- Case studies:
- The portfolio company perspective
- The investment decision perspective
- The investor (LP) perspective
- The private equity firm (GP) and regulatory perspective
- An overview of the reporting landscape
