During the height of the Covid-19 pandemic lockdowns, when travel stopped and time constraints shifted, CalPERS and Carlyle got a small group of GPs and LPs together on videoconference to discuss the ongoing challenges they were facing with ESG data.
Despite the proliferation of ESG frameworks and ratings providers, there was still no standardized, meaningful, and performance-based data from private companies. The effect has been paralytic:
- LPs and investment managers have not been able to see standardized, comparable ESG data across their portfolios.
- GPs have struggled with a mounting volume of bespoke ESG data requests, and have been unable to know if they are making meaningful progress on the ESG topics that really matter.
- Portfolio companies have had to navigate an increasingly complex set of ESG frameworks.
- Broad-based data about ESG performance in the private investment markets has been nonexistent.
For ESG executives across the industry, this was deeply frustrating. How could they put so much time and effort into ESG topics, but still not understand whether progress was being made? There had to be a way to drive convergence around a standardized set of ESG metrics and a mechanism for comparative reporting to benefit all stakeholders in the private markets.
*Founding members include CalPERS, Carlyle, AlpInvest, APG, CPP Investments, Employees Retirement System of Rhode Island, PGGM, Pictet, PSP Investments, Wellcome Trust, Apollo, Blackstone, Bridgepoint, Cinven, CVC, EQT, Permira, and TowerBrook
The group’s conversation advanced from sharing concerns to developing a plan of action. The GPs and LPs that would become the founding members of the Initiative* spent many hours on videoconferences together as they brainstormed ideas for an ESG initiative designed specifically to meet the needs of private equity firms and their investors.
They agreed that it needed to be simple enough that the system could be enacted quickly, broad enough that it could be applicable across all of private equity, and substantial enough to provide meaningful data. The metrics would need to be consistent enough to quickly establish benchmarks but flexible enough to allow room for continuous improvement.
In September 2021, the founding members led by CalPERS and Carlyle, who became the inaugural Co-Chairs, announced the launch of the initiative. The EDCI has since experienced tremendous growth, with more than 260 GPs and LPs now part of the initiative.
The partnership is open to any GPs and LPs that wish to join and agree to support the principles of the work. We hope you’ll join us in the EDCI’s mission of generating meaningful, performance-based, and comparable ESG data for the private equity industry!
How we are governed
The ESG Data Convergence Initiative is led by its members. The EDCI Steering Committee, composed of 8 LPs and 8 GPs, is the governance body responsible for the initiative and is led by two Co-Chairs (one GP and one LP: currently Carlyle and CPP Investments). The Steering Committee for the inaugural year has been comprised of the founding GPs and LPs that were part of the initial work to launch the initiative.
Membership on the Steering Committee will rotate to bring in perspectives from the broader participating group of LPs and GPs. Beyond the Steering Committee, all members have opportunities to be actively involved, for example by serving on working groups or providing feedback (e.g., on EDCI metric selection via a survey).
The Steering Committee conducts annual sprints to review the initiative’s progress, and our process, organization, and scope. This includes a retrospective of the initiative’s annual cycle of data collection, and consideration of proposed changes to the initiative for the following year (e.g., refinements to the EDCI metrics).
Supporters of the initiative
The Institutional Limited Partners Association (ILPA) and Boston Consulting Group (BCG) are both formal supporters of the EDCI, and work closely together to support the initiative. ILPA and BCG are both passionate about the initiative’s long-term success of building trust, transparency, and convergence across the GP and LP communities.
ILPA serves as official Secretariat to the EDCI (since July 2022) and facilitates the annual EDCI Steering Committee sprint meetings. ILPA also supports Steering Committee governance and elections.
ILPA is continually working to align LPs and GPs around important ESG issues and provides education, resources, and toolkits for private equity investors looking to integrate ESG considerations into investment programs. For more information, visit ILPA’s ESG resources page.
BCG: Benchmark creation and initiative support
BCG is currently serving the initiative as the third-party aggregator of anonymized data through BCG Expand, a fully-owned subsidiary that specializes in benchmarking, in order to create a robust benchmark, derive research insights, and support any external publications as governed by Steering Committee approval. In addition, BCG provides initiative support to EDCI participants (e.g. monitoring an email helpdesk), and the EDCI Steering Committee (e.g. gathering participant feedback on EDCI metrics).
In subsequent years, the group may explore additional third-party partnerships for 1) data aggregation/transmission, 2) data analysis and benchmark creation, and 3) program management of this effort. Selection will be governed by the Steering Committee, but will focus on initial criteria, which include requiring:
- Credible, independent, trusted third party
- High-level of data security and privacy
- Abidance with the group’s guidance on the use of data
Current Steering Committee Members
Current EDCI Members
Currently, 260+ total members (169 GPs and 95 LPs/IMs) have committed to the EDCI, representing ~$25T USD of AUM worldwide