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Apex Group to Help Private Markets With MJ Hudson ESG Purchase

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Apex Group will harness the ESG data and advisory firepower of its recent acquisition to capitalise on an expected surge in reported sustainability data in its services to private markets, which account for at least a third of financial institutions’ investments.

The investor services company’s purchase of MJ Hudson’s ESG software and advisory team boosts its sustainability operations as companies in Europe begin putting their Corporate Sustainability Reporting Directive (CSRD) processes in place. More than 150 experts will be available to advise companies on their CSRD compliance requirements to provide the most accurate data for regulators and investors.

“A lot of clients are still in the foothills of ESG, where they’re defining policies and grappling with the complexity of ESG regulations – what they could benefit from is the combination of advisory and software support to establish their ESG approach in the right way,” Apex managing director of ESG and sustainability, Emma Bickerstaffe, told ESG Insight.

Institutions Benefit

The EU’s CSRD is expected to draw a wave of new ESG data on about 50,000 companies when it is fully implemented by 2025. Data will come from large and small listed companies as well as the bigger private companies. The first batch of businesses to report will need to do so by the end of next year.

While the data will be a gift to investors in public companies, the influx of information will also be a boon for private equity and debt markets. They have been struggling to source data on the non-listed firms that account for the lion share of their portfolios. With between 30 per cent and 50 per cent of pension, insurance and foundation funds’ money going into such markets, the implications for institutional sustainability investors are substantial.

Corporate Engagement

Bickerstaffe, who had overseen MJ Hudson’s ESG business, said Apex would focus on providing advisory and data-led software solutions to private-market clients, including sustainability advice to asset managers.

Working mostly on behalf of private funds, Apex advisers will help portfolio companies to bolster their reporting capabilities, identifying how they can comply with CSRD’s double-materiality test and data sharing. Apex advisers would also engage with companies on how to improve their ESG performance.

“Companies are struggling with CSRD and what CSRD means for them,” said Bickerstaffe, adding that the regulation’s emphasis on assurance of process before its disclosure was adding complexity to companies’ preparations.

“I think what’s important in the assurance aspects of CSRD is that the methodology that a company uses to comply with CSRD is assured,” she said. “It’s important that assurance is as focused on the process and the approach that companies are taking to CSRD reporting as it is with the outcome of the CSRD report itself.”

The assurance requirement will place a greater burden on reporting companies, forcing them to engage more deeply with them and their stakeholders.

Data Challenge

Bickertsaffe said that a fundamental weakness in private-market ESG processes is the absence of good quality data.

“In private markets, that’s an ongoing challenge,” she said. “As an industry, we’ve been at this for several years and there are still real challenges to overcome in terms of having that data available for these reports.

“There are plenty of companies that don’t yet have the right processes or operating procedures in place to even monitor and track the data needed for some of these reports.”

Apex seeks to address this by offering software, data verification and validation services to its clients and that helps in its advisory services to investors. The company also provides a range of ESG data products to help both investors and corporates, built on the company’s growing database, which currently covers around 2,500 companies.

Among those data services are ESG Health Check for company, manager and fund assessments, the first-ever ESG rating, reporting and benchmarking product for private companies, and an ESG data-as-a-service product.

“Managers and investors should really be looking what insights they can draw from that information and use that to drive improvements as they work with their portfolio companies to put plans in place to improve year-on-year,” Bickerstaffe said.

Broad Appeal

The latest such service, Impact Positive, is designed to aid investors in developing and managing impact-focused funds.

Bickerstaffe said Impact Positive provides a means for investors to identify the key performance indicators they will need to measure and with which they would need to align their funds to “accelerate the impact” that their investments are having.

She said that Apex’s impact products were not simply there for impact investors but for all funds as impact become as important as financial metrics in assessing corporate performance.

“We really strongly believe that all managers need to start considering the impact of their investments, whether or not they’re in an impact Fund,” she said. “We really encourage clients to, in a very structured way, take a more holistic approach to ESG and consider how to magnify the positive impacts of their investments.”

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