The lack of transparency in private markets is making it difficult for fund managers and advisers to assess them from an ESG perspective, according to commentators. Data from the Responsible Investment Association Australasia (RIAA) shows 99 per cent of investment managers said they implement ESG integration within their investment strategies. However, this data is harder to obtain for private markets funds which are not publicly listed and are typically more opaque with their information. According to Preqin, 60.5 per cent of private markets assets under management is managed by a fund manager with an active ESG policy, falling to 52.8 per cent for private equity. Lonsec appoints new CEO for research divisionGQG reclaims US$160bn FUM markEstelle Parker, co-chief executive of the Responsible Investment Association of Australasia (RIAA), said: “The lack of transparency in private markets presents a challenge. The demand for clearer ESG data is growing across the board and investors are driving this change to make better, long-term decisions. “Data providers can struggle to obtain ESG data from unlisted companies as they often tend to rely on publicly available information.”View allIt is not just a challenge for investors but for fund houses alike as research by State Street found 61 per cent of private market managers believe including ESG information will make their funds more attractive to the retail market. However, they identified quantifying ESG risk as a major challenge for them.In its 2024 Private Markets Outlook Headwinds & Tailwinds report, which surveyed 500 investment institutions globally, it said both investor clients and manager parts of the market were “having trouble” assessing private market opportunities which was presenting challenges from a risk perspective. Over a third (37 per cent) said they were experiencing challenges in both producing non-financial data, such as ESG, and obtaining it.Over at the Transition Pathway Initiative (TPI), a global initiative to assess companies’ preparations for a low-carbon economy, chair David Russell said private markets are an area that needed improvement in this format.He commented: “There are projects out there trying to encourage the sector to provide more information on ESG and climate information, but private companies are notoriously bad at this because they don’t have to do so. It’s definitely an area that needs to be improved.“We would say they are being ‘encouraged’ to provide this information and there is a lot of engagement from asset owners in Australia to do this, but we can’t make them do it sadly.”He said the TPI is actively seeking to increase its company assessments in the private sector to help investors obtain the necessary information to meet their ESG criteria.“We need to work out a way to assess private companies and get the information out of them to be able to undertake the assessment, but we are looking into it.”From the persp
Gio. Feb 13th, 2025
