As we march towards the UN’s 2050 deadline for reaching net-zero emissions, private equity has the unique opportunity to help build a sustainable future and profit while doing so. With the average PE firm holding 5-14 portfolio companies, it’s a big endeavor to start collecting ESG data from their multiple investments across different industries. But while the time, money, and effort needed to implement ESG reporting can seem overwhelming, there are real benefits.
Fortunately for PE firms and other organizations, there are technological solutions that can make this process easier. ESG software streamlines ESG data collection and management and calculates impacts included in popular reporting frameworks.
Adopting an ESG software can ultimately allow PE firms to focus more on portfolio management and less on data spreadsheets and reporting cycles. Read on for the four ways ESG software can benefit your PE firm.
Streamline ESG Data Capture from Portfolio Companies
Capturing ESG data from portfolio companies can be cumbersome and time-consuming, but it’s necessary to help firms make informed decisions. With multiple companies in a portfolio, each with different key ESG metrics to track, the volume of data can be overwhelming. But PE firms can utilize ESG software to make data collection and management easier.
The right ESG software automates data collection to save general partners (GPs) and portfolio managers the time and effort of manually collecting information from the many data sources their portfolio companies may have. ESG software can directly connect to these sources to extract the necessary information and bring it together in a single interface.
No more endless spreadsheets or waiting for an organization to share specific metrics, ESG software handles all ESG-related data while improving data accuracy, identifying potential errors or outliers, and managing the auditability and security of your organization’s data. With the proper ESG software, you can build a foundation to start connecting data with purpose.
Simplify ESG Management of Investments and PE Operations
A software with the right capabilities makes managing ESG performance and risks across multiple investment companies easy. ESG software can help bring ESG programs to life with interactive strategy maps, integrated scorecards, benchmarking, materiality assessments, and much more.
These features allow PE firms to not only efficiently collect ESG data from their portfolio companies but also strategically use that information for more informed decision-making.
ESG software makes it easier to identify and address ESG risks and opportunities, enabling PE firms to create action plans to improve the ESG performance of both their investment companies and across their own operations.
Reduce Reporting Timelines with Automation
Another way ESG software helps PE firms is by saving time on generating reports. With automated ESG reporting, PE firms can easily assess the progress of their portfolio companies and quickly. Complex ESG data is distilled into actionable insights for general partners and portfolio managers and also provides them with scenario and sentiment analysis, gap reporting, and much more.
With 100s of ESG reporting standards and frameworks that are everchanging, a truly comprehensive ESG software can easily navigate the most relevant and automatically update to meet the newest reporting requirements. The climate accounting feature should be purpose-built based on the GHG Protocol, with built-in emission factors to calculate and accurately report on Scopes 1, 2, and 3 emissions. Popular frameworks like TCFD, GRI, CDP, and SASB should also be included.
This saves firms the time and effort associated with manually managing changes to reporting standards and frameworks.
Provide Real-Time Updates on ESG Performance
One of the biggest benefits of ESG software is the ability to access real-time ESG performance for portfolio companies. A comprehensive solution will also feature engagement and communication tools like real-time infographics, live microsites, and more.
These dynamic features allow PE firms to communicate progress to various stakeholders in an easy-to-digest and visually engaging way. General partners and portfolio managers no longer have to rely on static, outdated sustainability reports. With the right ESG software, reporting to stakeholders becomes as easy as sharing a live webpage or infographic.
With less than 10% of global private equity firms belonging to the PRI (Principles for Responsible Investment), PE firms that embrace and share their ESG performance and progress can take the lead as responsible ESG leaders and engage both internal and external stakeholders along the way.
Ready to start utilizing ESG software to manage portfolio companies and firm operations? The FigBytes ESG Insight Platform helps private equity firms manage and maintain a sustainable and profitable investment ecosystem with accurate and engaging ESG reporting.
