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 350 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!