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New ESG reporting standards set for key players in private equity, venture capital and infrastructure

Invest Europe, a Brussels-based association representing Europe’s private equity, venture capital, and infrastructure sectors, said today it plans to develop a coherent standard for how private equity and venture capital firms should report on environmental, social and governance (ESG) issues.

The group wants to “bring harmonisation and transparency to essential ESG reporting for investors and regulators.”

The new reporting standard will be developed and established by the summer of 2022, and will enable private equity firms to navigate and comply with the rising demands for action and openness on their ESG activities, the association set in a statement.

Global standards

In 2021, a wide range of new ESG-related regulatory reporting requirements were set globally, regionally and nationally, including the EU’s Sustainable Finance Disclosure Regulation.

In parallel, a range of privately-led initiatives – both commercially and non-commercially driven – were developed.

Some of these respond to regulatory standards, while others are tailored to meet the demands of institutional investors.

Eric de Montgolfier, the CEO of Invest Europe, told ESG Insight that “the proliferation of ESG reporting requirements places a heavy burden on European private equity managers, many of which are spending too much time on developing templates and reporting, rather than focusing on delivering tangible ESG results across their firms and within portfolio companies.”

“By creating a standard for ESG reporting, Invest Europe will provide transparency, clarity and harmony to this space – benefiting firms, their investors and stakeholders more broadly,” he added.

The move to develop a reporting standard for the European private equity and venture capital industry reflects Invest Europe’s strategy to position itself as a leader on ESG, and to showcase the benefits that the industry continues to contribute to society and the environment, Eric de Montgolfier explained.

Climate

In November 2021, Invest Europe published its report Climate Ambition, in which it committed to actively support the 2050 goals set out in the Paris Climate Accords.

One of the workstreams needed to fulfill that ambition is building and maintaining tools for members and the industry to comply with the rules, and to develop standards that will help the industry move towards net zero.

In parallel, the European Data Cooperative (EDC) will also begin collecting ESG data from the European private equity industry on key performance indicators, including actions related to climate change, female representation in private equity backed companies, and bribery and corruption policies.

The EDC is a market-leading database established in partnership with national private equity associations across Europe by Invest Europe.

The EDC gathers fundraising, investment, divestment and economic impact data on more than 1,600 European private equity and venture capital firms and their portfolio companies, accounting for 90 per cent of the €754 billion in capital under management in Europe.

Invest Europe’s reporting standard will be developed with the participation of members, representing both LPs and GPs active in Europe, and across the range of private equity segments from local venture capital funds to global buyout groups. 

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