Post-investment services firm Colmore is the latest company to engage sustainability software provider Dasseti in private markets data processes.
The unit of British alternative assets business Preqin coordinates data gathering and other services for limited partners (LPs) and allocators – which largely comprise financial institutional investors. It has integrated Dasseti Collect into its suite of tools enabling sustainability data to be obtained from portfolio companies for use in its clients’ investment, risk management and regulatory processes.
Institutional investors have become a key focus of ESG data provided for private equity because around a third of their capital is allocated to such alternative asset classes. While the companies in which private equity funds invest are often exempt from compliance with broader sustainability reporting regulations, LPs and allocators often are not. That has led to a flourishing market in products and services that mine ESG information from portfolio companies.
Messy Data
Colmore commercial director Alex Tarantino told ESG Insight that the General Partners (GPs) who manage the billions of dollars that LPs pump into private funds each year often can’t offer full transparency into individual portfolio companies’ climate performance.
“GPs have started to produce ESG outputs that talk about how aligned they are with different ESG frameworks and how they are implementing policies to reflect what they said they were going to do in ESG when they started the fund,” Tarantino said. “However, that data is often aggregated and summarized, not broken down at the level our clients expect. So if you have a limited partner who’s invested in 100 funds, they need to be able to quantify their emissions profiles looking through to the underlying asset held by the funds. That data isn’t really present in GP reporting.”
Colmore, which monitors 8,500 funds and has more than 60 clients, chose Dasseti’s solution because it enables the gathering of emissions and other data from GPs without adding “friction” to existing post-investment documentation. The Dasseti technology streamlines the process by allowing GPs to have a consolidated view of all LP requests, facilitating the sharing of their data between LPs through a single process.
“We became, effectively, a consolidator among our clients of requests that allows the GP to enter a single platform instead of 60 platforms and answer once and reuse it for any other LP,” Tarantino said.
Reporting Frameworks
New York-based Dasseti’s plug-in to the Colmore portal has been configured to collect data according to the ESG Data Convergence Initiative (EDCI) and a regulatory reporting framework that’s built around the Sustainable Financial Disclosure Regulation (SFDR). Colmore can then use the information included in those templates to disseminate to clients as they need it.
Where data is missing, Dasseti Collect offers integrations which enable proxy metrics based on similar companies within the public realm, on which there is usually more information.
The data can be used to provide an ESG overlay for funds that don’t yet have a sustainability tracking requirement in their mandates. That will apply especially to older funds that were set up before ESG was a widespread focus of GPs.
“Ninety per cent of the [data gathering] work actually happens between the GP and the portfolio company to ensure that they’re building the frameworks, building the data flows, and then we are requiring that the GPs are able to report transparently that via our system, so the LPS can have a look through into that information,” said Tarantino.
New Partnerships
Colmore’s tie-up with Dasseti went live in the first quarter and is working “without a hitch”, he added
The announcement of Colmore’s rollout came in the same week that sustainability technology company Clarity AI said it is building ESG benchmarks for Dasseti’s private market clients. The deal will see Clarity AI, which has a store of information on 70,000 companies and 43,000 funds, create gauges focused on a variety of ESG metrics including the 14 Principal Adverse Impact Indicators required by the SFDR.
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