The imperative for ESG reporting & disclosure

Best Practices ESG Our Partners Sustainability Reporting
  • February 23, 2021 | Chris Ogletree
The imperative for ESG reporting & disclosure

Understanding the imperative for ESG reporting & disclosure

In a recent webinar, Helee Lev, Goby’s CRO, was joined by Jamal Hagler and Drew Maloney from the American Investment Council to dive into some of the catalysts for the growing imperative for organizations to incorporate ESG-focused practices, strategies, and policies into their business operations. They discussed the business benefits of tracking ESG data, strategies for meeting the increased demand from investors and stakeholders for ESG disclosure, and demonstrated tools that will simplify your data collection, reporting, and disclosure processes. Read the transcript of the webinar below or click here to view the recording.

Drew Maloney: My name’s Drew Maloney. I run the American Investment Council which is the largest research and advocacy group for private equity here in Washington. I’m just going to take care of a couple housekeeping matters at the front end of this and then we’ll introduce you folks and get started on the presentation.

So first, this webinar is being recorded. We will distribute the slides to everyone after the session. Second, the webinar should run about 30 to 35 minutes with the last 10 minutes set up for questions. I think you can submit questions through the “Questions” section in the control panel and we’ll try to get to as many questions as possible. Third, throughout this webinar, we will have a few poll questions. The questions will pop up on the screen along with your options to answer. Note that the responses are anonymous so your individual answers will not be seen by anyone so everyone is encouraged to participate in that.

So let me now shift over to our speakers. We also have joining from the American Investment Council, Jamal Hagler. Jamal is the Vice President of Research here and also leads our ESG efforts inside the association. We also have Helee Lev. Helee is Goby’s Chief Revenue Officer. Goby is the most intelligent, comprehensive, and intuitive platform for ESG management. They help organize and develop ESG initiatives that help companies track their capital and sustainable and responsible growth and also mitigate enterprise risk.

So let’s just move over to the first slide if we can. And let me just quickly set the table before I turn it over to Jamal. And the reason that we put together this partnership with Goby is we really saw ESG as a space that there is a lot more demand for information. And if you saw probably recently in Larry Fink’s investor letter, not only had he called for more disclosure from public companies on certain metrics, but he also asked for those to be applied to private companies as well.

Yesterday, on an AIC webinar that we did, we had the former SEC, Jay Clayton, who also commented that there is a move among regulators and policy makers to ask for more data. So in order to sort of get ahead of this, I know many firms are collecting the data, but they may not be collecting all the data. We thought it would be helpful to have this webinar today to sort of work through some of the things that you might need to do that. So before we do that, let me just turn it over to Jamal and he can sort of talk a little bit more granularity what we’re seeing here in Washington as far as some of the demands by policy makers and regulators for data. Jamal?

Jamal: Thank you, Drew. So, yeah. Over the past few years, we have seen a growing chorus of policy makers asking for more disclosure from investments. Currently, a lot of these disclosure asks and legislation that would require a greater disclosure are focused on public companies and making sure that the companies do climate risk assessments at uniform ESG standards across all companies as well as looking at the impact of workforce investment of public companies; how much are they investing in their workers and making sure that they’re treating their workers well. And as private equity and private companies become a bigger and larger part of the economy and there are less public companies, as we’ve seen over the past 20 years is about half of as many public companies that we had in the past, we could see these demands for disclosures moving over into the private company area.

And so we think that as the growing demand for disclosure comes, we think that our members in all private equity companies or private equity firms and portfolio companies need to have the tools available to them to, one, collect the data and, one, be ready to answer questions from policy makers and the public at large around the questions surrounding ESG, diversity and inclusion as well as broader stakeholder impact of private equity investments. So we thought this would be a perfect opportunity to kind of showcase some of the tools that are available for our members to use in private equity firms and portfolio companies to use to make sure that they’re ready when these questions do come from policymakers in the future. So with that said, I think I’ll hand it over to Helee for her to start the presentation.

Helee: Excellent. Thank you so much, Drew and Jamal. We appreciate AIC joining us in the partnership and the attention of your member base, for sure, as this is a growing industry. So if the chart in front of you doesn’t tell the story, and this is just one of many charts that we could display that are showing the need and the adoption and the maturity of ESG in the private equity space just being up and to the right. So this particular one is indicating the growth in the number of UNPRI signatories. That’s, of course, one of the voluntary frameworks that folks can subscribe to. It’s not a one size fits all, but, again, just meant to be representative.

And having been in this space personally for the last 15 years of my career, I can add that I think ESG has finally really hit that inflection point of no longer being a nice to have, but really being a need to have. And I hear from a lot of the folks I speak to, specifically in private equity, that LPs are getting more sophisticated. They’re demanding ESG programs with more teeth, if you will, they’re seeing past greenwashing. It’s no longer enough to have what I’ve heard people refer to as a fluffy deck or a nice green webpage, you actually really have to demonstrate that your program goes layers deeper than that. So that’s what we’re going to spend a lot of today talking about because that notion in and of itself can be intimidating without a way to break it down and a tactical approach to execution. But just note here, obviously, that the main takeaway or punchline here, this stuff is here to stay. It has gained momentum. Like I said, in my opinion, it’s past the tipping point. And if you’re not on board already, pretty soon you’re going to find yourself behind.

So with that being said, I always like to get to know the audience that we have and cater the discussion to your interests. So I’m going to start with a poll question if you’re able to have a look at your screen. So if you think about your own company and their ESG journey, where do you feel that you’re at? So one being, “We view ESG as a competitive advantage,” and then the opposite end of the spectrum being, “What does “E” stand for in ESG again?”

Now, don’t be embarrassed. I talk to folks on multiple ends. I talk to folks who have impressive, mature ESG programs that in their fifth, sixth, seventh year trying to figure out how to not plateau and keep things up and to the right which is where everyone wants to be. And I do have folks say, “Well, what is the “E” again? Where do we get started? We know we have to do something, but we’re not quite sure where to go.” And then, couple in between being you might participate in a handful of disclosure programs or you’re starting to evaluate what’s out there and get the lay of the land to find a fit. Or you don’t voluntarily do anything above and beyond. You’re meeting kind of basic expectations.

So I’ll give folks a moment to clock in their answers and this will help you guys as well kind of see where your own peers are at to make you feel either better about yourself or, I suppose, worse about yourself. And it looks like the early responses are coming in. A lot of folks are kind of right in that middle ground, “We’re evaluating disclosure programs to find the right fit.” In which case, I wouldn’t say that you’re behind at all. A lot of your peers are kind of in the same boat under the increased scrutiny and pressure that I mentioned in trying to figure out what’s out there. So a couple more seconds here. It looks like 62% have responded. Don’t pass up your chance. Pause the multitasking, make a vote, go back to the multitasking. We won’t be offended. Okay. I think we’re good. All right.

So here are the results. We have a handful of folks that participate in several programs and are perhaps the leaders. And there will be an opportunity for you guys to speak up. Some folks that are doing a few programs versus many. The majority of people are really just trying to figure out the lay of the land which will be great for today’s plan and agenda. “We don’t disclose,” and then a couple folks, thanks for not being shy, just are really trying to figure the whole thing out. The “E” in ESG stands for “Environmental” so if you learn nothing else today, there you go. All right.

So I like to always start off with what we’ll call the palace. It’s good to have a vision of where you’re going even if you’re just beginning your ESG program or even if you’re on your way. So one specific framework, one of a handful, that people subscribe to is SDGs or Sustainable Development Goals. And I think it’s important whether this is your framework or otherwise to have some sort of framework. And we’ll talk a bit about the options that are out there.

And like I said, I want to start with the palace. So what that’s going to help you do, this is an example of a CSR report that one of our customers puts out every year. Now, remember this is not year 1 or year 2 of them doing this. This is a mature ESG program. This is a mature report. These folks have been at it for years. You can see the Sustainable Development Goals, the ones that they have chosen to align with. They have data. Their program has what you will hear me refer to as teeth. So, again, just one example here of what we’ll call the palace of just to get an idea of where we’re going.

Here’s another one. So, again, it goes above and beyond just a graphically appealing presentation. No one’s trying to greenwash anymore and there has to be some meat inside the actual report itself. One more, in case you didn’t have enough. And what these reports are really doing, they’re covering all facets of the ESG so the environmental, the social and the governance, both from a qualitative and a quantitative standpoint. All right.

So as you’re thinking about the various interests, and it’s investor and stakeholder interests, so stakeholder engagement is going to be one of the biggest parts of this exercise because all around you, right? You have to think of who it impacts, what their interests are, why they want ESG reporting, to what level. It’s not a one size fits all kind of thing. So from the standpoint of reporting disclosure, transparency, then you have to look through these what we like to call the alphabet soup of frameworks and which one you want to align with to decide how much rigor you want in your program. And then, of course, you’ve got to set targets. Age-old tale, you can’t manage what you don’t measure. You’ve got to draw a line in the sand, kind of see where you’re at and the goal being continuous improvement with regards to what KPIs you choose to measure. So those are kind of the three components of any program.

As mentioned, there are a bunch of disclosure frameworks. In the spirit of today’s webinar being short and somewhat of an overview, I will not go into all of these. We can spend time dissecting them at a later date, but there are reporting frameworks, there are guidance frameworks, there are third-party frameworks. So these are a few of the ones just to start to notice and to get to know and selecting which one or combination is correct for you is part of kicking off the ESG journey.

All right. So our approach, the way that we like to break it down at Goby, we start off with what we call materiality assessment exercise. And what this is going to help you do is really have that plan. So we talked about having the vision of the palace, of where you’re trying to go, but then you need the actual roadmap on how you’re going to get there. And that involves really talking to and in-depth interviewing all the stakeholders, discussing what is material to your business and putting together a roadmap of 12 months, 24 months, 36 months so you know what you’re doing and where you’re going.

Then, once you have that in place, you need a tool to be able to, in a scalable, repeatable manner across often times multiple assets, portfolio companies, whatever your investment types are, collect data in an ongoing way that’s not too invasive. It’s lightweight and easy, but also has enough teeth and data behind it to comprise a meaningful ESG program.

So as mentioned, the materiality assessment, the highest level, is going to measure the potential impact to the fund and as well as the importance to each stakeholder from their own viewpoint. Why do you need it? Long story short, you need the roadmap, right? You need to know where you’re going. We saw in real estate, so Goby has been around for the better part of 12 years really coming up through commercial real estate, both public and private side of things. And where it began is these random acts of sustainability, if you will, at the asset level, but there wasn’t necessarily a concerted effort or plan or direction from the top so they kind of did it backwards, right? They started doing some tactile execution without having the plan. The way now that ESG programs are being launched is starting what we would consider to be the proper way of let’s get the 30,000-foot overview, let’s figure out who you are, why you’re doing this, what your budget is, what your appetite is, what it means to your organization and then lay out a plan. Then also, what are you going to tactically execute in year 1, year 2, year 3 and beyond and what are you going to measure to demonstrate your success.

So this is a sample of what a deliverable might look like. It’s going to go through a timeline. It’s going to give you a literal roadmap of what you need to do and this is the result of that soul-searching exercise about your organization, but it’s going to give you very tangible next steps.

This is an example of a materiality matrix. And, again, it’s going to examine, in various categories that you can see there on the left, what is the importance to your stakeholders and what is the impact on the business. And you’re going to map out these different facets which, again, is going to help you decide who you are as an organization and who you want to be and how these different components of an ESG program matter to you and how you’re going to go after them. All right.

So this brings us to the second polling question. Has your organization gone through a materiality assessment exercise either internally amongst your own team or externally with a third-party? So I’ll give you guys a couple minutes. And I always tell folks too that we talk to the materiality assessment exercise in and of itself is a great starting point to launch your ESG program and initiative to get everyone thinking along the correct lines. Even if you’re not doing that measurement at the investment level right away, having gone through this exercise, having your plan, setting up a timeline is really meaningful. And it’s meaningful internally for your own organization, but also from the standpoint of communicating to LPs and prospective investors as well that you’ve taken a formal next step as far as executing on your ESG initiatives. All right.

So I think we’ll close that poll. Thank you for those who shared. And the results, so 39% of folks who responded have gone through this exercise. That’s awesome. Of course, did not break it down to see if you did it internally or externally with the help of a third-party partner. And then 61% of folks have not yet done it. So, again, just a tool for you folks to know where your peers at, at least on this call. We can close that out and go to the next one. Okay.

So after you’ve completed the materiality assessment, we are big advocates of using technology to collect, track and disclose your ESG performance. So anything in the world can be done via Excel and brute force, but as a technology company, we believe that there is a scalable methodology for collecting data across all of your investments in a repeatable way that is non-invasive and cumbersome. We have the use of a technology platform like Goby. And what this is really going to do is give your program some teeth.

The reason I have the octopus up here is you have to get those tentacles down into the investments. It’s really no longer enough to say here’s what we’re doing at the entity level, here are our own policies at our firm, what we’re doing up here. What the LPs and the prospective investors really want to see is that you have a program that extends beyond, that you’re taking responsibility of your actual investments, that you’re monitoring what they’re doing at the investment level. And hence the octopus reaching down deep and collecting information.

Now, of course, you have to balance that. A friend and mentor of mine said to me, “Helee, for the love of God, just make it easy. Just make it attainable.” No one is looking for another difficult system or process or lengthy engagement. So you’ve got to really strike that balance between a program that’s meaningful and isn’t greenwashing, but also that is lightweight enough and not cumbersome.

And if you think about data coverage from two levels, so we mentioned going down, right? From the fund or the entity level, but then also going across. So if you have 200 investments or 200 portfolio companies, you need a way to collect that information again in a scalable, repeatable way. Even if you only have a handful, you want it to be consistent as well. So think about data coverage both from the top down as well as the side to side, if you will. So, yeah.

Part of it is about capturing the data. That’s half the battle, right? Is collecting the actual information from the investments, but then you want to turn it into action. So, great. I’ve collected a lot of information. I have nice visualizations. What are you going to do with them? How are you going to communicate that? How are you going to move the needle? So that’s really the next step that we like to ensure that people are taking is actually doing something with it, not just spending time and effort and money collecting information for the sake of collecting. And then, of course, you want to tell your story. So whether that is for purposes of current or prospective investors or just to tell the story to your own employees to other stakeholders, you need that data and you need it digested in a meaningful way to be able to effectively tell your story.

So, again, as we set up these programs, we like to kind of think of year 1 as a Baseline Year. So launch your index, do the materiality assessment, figure out who you are or where you’re going, get the vision and maybe collect some data. Maybe it’s just the qualitative data in year 1. Maybe you do some quantitative data as well. Year 2 being what we call the Performance Year so add in some quantitative metrics or add more quantitative metrics, add on additional modules, perhaps specific in D, E and I or other areas and really start to elevate the performance and increase the depth of the information you’re collecting. And then in the Expansion Year, so we understand too everyone wants to be up and to the right so you can’t do everything in year 1. We also understand that people have other reasons and other functions of the business or even goals for the investments or the portfolio companies that aren’t ESG-related so you expand at your pace. That’s what I like to say is there isn’t a one size fits all program. It’s about you and your company and what you’re doing and where you’re going.

So I mentioned the use of a software. So essentially all this is going to do, it’s going to help a lot with the logistics, blocking, tackling, communication, dissemination of surveys and then, of course, collecting information in a way that’s consistent. It doesn’t require a lot of manual intervention on the back end. And then, of course, the most important thing is being able to visualize the trends, expose the risks, identify focus areas, perhaps give accolades to the folks that are doing it right. In this specific example of a screenshot, on the left-hand side, I know it’s small, the purple line is showing the average gender diversity percentage in the European Union. And the bar graph is showing one specific portfolio company that’s increased at year over year. They’re maybe not quite yet at that benchmark, but they’re trending in the right direction whereas others are either stagnant or going the wrong way. So it’s going to give you some insights just based on the information that you collect, but what you do with it, of course, is half the battle as well.

So just some dimensions. So once you do have a platform, we’re able to collect via technology. There are all kinds of tagging and sorting you can do. You can sort by industry. Show me my performance in my consumer goods category. You can sort by fund vintage. You can sort by time period. You can start to see measurement, year over year improvements and other standards. So once it’s in the system and tagged and you’ve set up a methodology to collect the data on an ongoing scalable, repeatable manner, the data will flow in. And the possibilities of what you do with it and how you use that to leverage a best-in-class ESG program are really endless.

And what it all boils down to, everyone wants to know. You want to get that granular level data, but you also want to be able to boil it up and say overall, on the whole, how are we doing? What’s the reflection on us as a GP versus our peers? How have we improved year over year on ourselves, et cetera, et cetera? It can also be used for diligence so a lot of folks I talk to are interested in some sort of ESG survey or measurement component at the time of diligence. So we’re cognizant of that as well. I’m a fan of this. I think it sets the tone for new companies coming into the family that this is something that your organization does, it’s important to you, you’re going to do it, it’s going to be the expectation. And in some cases, I was listening to a webinar where there was a lady that mentioned they had actually walked away from an investment because of something they discovered during an ESG due diligence exercise that wasn’t an ESG factor, but had material impact on the business that caused them to walk away so as important upfront as it is on an ongoing basis, if not more so. Okay.

Another polling question. So we want to be, of course, respectful of everyone’s time, attention and where you’re at in your ESG journey. The results of this poll question won’t be shared, but if you would like to continue the conversation either from the standpoint of evaluating what you’ve done in-house or getting started, just know we won’t necessarily display. Oh, good. It looks like a lot of folks do want to keep talking so that’s great. As an ESG advocate, someone who spent my entire career in ESG, I couldn’t be more delighted to see the uptick in interest in ESG. All right. Looks like over 80% of folks would like to continue the conversation so we will continue to do so. We’ll leave this open for a couple more minutes.

And as mentioned today, it was meant to be really introductory. There are a lot of rabbit holes to go down with regards to framework, with regards to materiality assessment, with regards to data collection, with regards to how much is enough, with regards to where you’re at in your fundraising cycle and when it makes sense to do these kinds of things. And we want to be your advocate as AIC wants to be able to educate and be your advocate on what you can do and how you can craft a program that fits your size.

Just thinking again, a current customer, as we were talking through, they looked at becoming the UNPRI signatory and they kind of just came to the conclusion that it was too much for them. It was just too much for the size of the organization they are, too much for what they were trying to do and they passed on it. So they were able to find, through our, help an ESG program that still helps them accomplish their goals, that gave it the teeth and the tentacles that we talked about it, but wasn’t too much overkill for them. All right. So 83% of you would like to keep talking about ESG which you’ve made my day so thank you; exciting stuff.

So we are happy to set up time. We have a Principal Consultant with deep subject matter expertise in the space. And like I said, non-invasive, happy to help, AIC member just to evaluate where they are and what they’re doing, no obligation, let you know if you’re pointed in the right direction. So we’ll be sure to put up information on how you can take advantage of that if you would like to. And we do have a special arrangement with AIC for AIC members to take advantage of so we will get to that.

In the meantime, let’s go to the questions. We have covered all the material and would like to open it up to you guys on the line. Don’t be shy. We do have a couple questions that were submitted in advance and I’ll let you guys go ahead and take those.

Drew: Let me just say, I mean I think this has been great and a great introduction. And I think it’s a good reminder that not only are the LPs asking for this information and I know some people have questions about which LPs are asking for this, but we see this coming here in Washington either from the regulators or the policy makers. And just to be able to have the data, we’ve been struggling for a couple years just to get jobs data from folks and just to start to collect this. So what I really like about this platform is it’s scalable. If you want to go UNPRI, you can go that high. Or if you want your dataset to be a little bit different, you can do that. So maybe you can talk a little bit about sort of what’s the timeline around starting an initiative like this and then being able to collect data and how that works.

Helee: Yeah, for sure. So as far as the timeline, if you’re looking to create a materiality assessment, that’s typically a 6-week to 3-month-ish process depending on the availability of the stakeholders and how quickly we get through the interviews. We’re working with a new PE firm as of last week who wants to get this done, the whole thing, exercise, soup to nuts, within 6 weeks so we will accommodate their timeline. That’s that.

As far as establishing the ESG index, framework and collecting methodology, we try to align that with a lot of folks want the data for AGM so they have something kind of polished and presented so depending when the AGM is. A lot of them are in October. We’re kicking those programs off now. The goal is to have something in October AGM, but ideally you want to lay the framework for your index, have the infrastructure there to collect the information and then it’s really on an ongoing basis. What we’re seeing is annually is frequently enough for now for most of the folks we talk to, but as we are technology innovators, we don’t see any reason why that has to be stagnant annual data. Our vision really would be that this could be like a monthly type thing.

I did talk to one group who was a bit more advanced in their own ESG initiatives that’s looking at collecting this data quarterly, not just annually. But that being said, it’s a crawl, walk, run. So if you’re doing nothing, collecting annual data is great; doing the Goby ESG index once a year is awesome. If you’re like this other group that I’m thinking of that wants to do it quarterly because you’re a bit more mature and ready to do that, then that’s great too. And we’ll all continue to innovate and grow together as this unfolds. So hopefully that answered your question.

I see a couple other questions here. Let’s see. “What type of LPs are looking for ESG information?” Good question. So I would say most of them are. I spoke with a lady the other day from a public pension fund and she was sharing with me a bit about what they’re looking for. And from her perspective, it was still in the like check the box stage, if you will. They weren’t necessarily looking to collect this kind of data, but she sees it on the horizon. On the other end of the spectrum, I’ve talked to family offices where it’s not at all on the radar. And then, of course, it depends on geographic location. So overseas investors are, of course, more mature in their demands.

We, even as we’re VC-backed and PE-backed, the questions that we get from different LPs even within our venture fund are all across the board as far as frequency and depth. So to answer this question, it’s kind of broad what type of LPs are looking for ESG information. So I’d say most, if not all, but it’s really to a different degree of granularity at this point. Some might start and stop at, “Do you have an ESG policy? Yes or no?” and that might be enough. Some might say, “Share with me some more in-depth information” and really require that it goes deeper than that. So it’s a good question and yeah, we can see it continue to evolve.

Okay, got one here. Two questions, “What if my companies need help? Who do they go to?” and “My operating partners are very busy. Does Goby help do this?” So yes, two questions. As far as help at the portfolio company level, yes, we can certainly help with that if they have their own initiatives. And then, with the operating companies being busy and, of course, asking them to do one other thing even if it’s just a survey can feel like it’s overbearing. In our experience, it’s really just all about effective communication; giving them a survey that is, again, lightweight, but meaningful, but user-friendly and easy where most of the information is readily available or they can get it within. We like to say it’s no more than 30 to 45 minutes to complete the survey, but the communication is what really helps.

You need from the GP level to say, “Here’s why we’re doing this, here’s why it matters, here’s how you can help.” And part of what we do is work through the communication strategy of, “Should that come from us? Should that come from you?” What if you’re a minority investor, how do you then still garner, get that information? So long story short, that’s all exactly what we help do when we’re looking through kind of, not customizing these programs, but just making sure that we’re going to effectively get as much engagement as possible. So that is, yes, part of what we work through with our customers.

Okay, another one. “Could you go over the frameworks you mentioned?” I could. So I could go back to that slide and go a bit more over the frameworks. I might come back to that one at the end for those who want to hang tight and learn more about the frameworks. So table that one for a moment.

“What percentage of firms, funds have started this process? What percentage of firms, funds are two to three years in this process?” So probably the best answer to that, you saw the poll results the same as I did of the just over 100 participants that are on this call. If that’s a representative sample AIC membership in Goby’s customer base, you can kind of garner where folks are at. Most of the folks on this call were kind of in that stage where they’re evaluating frameworks and trying to figure out the lay of the land. They might not have started a formal process just yet and that’s what I see. You know what I see a lot of, again, just anecdotally is folks that have done something in-house. So they might have had a deck in-house. They might have gone through materiality assessment in-house. They might have had some materials and information on their website that, their words, not mine, “Was good enough for my last fundraise, but isn’t going to cut it for this upcoming one.” So I think it has been on folks’ minds, but now, people are really looking to formalize what they’re doing.

Lots of questions, thanks guys. This is great. I’m going to keep reading through them. “With regards to impact investments, how important are ESG risks, for example flood risk, compared to ESG impact, for example jobs created for investors.? How should we weigh reporting of each?” So that is a good end up question. So impact investing is different fundamentally from just different types of strategies, but still having an ESG program. So there is some overlap between the two, but you could have a non-impact strategy or company or fund that still has an ESG program. So I might actually take that one as a follow-up, as a sidebar follow-up, because I think the answer is a bit more in-depth than I want to power through or glaze over right now with the group.

Okay, another question. I still haven’t forgotten about the frameworks. I promise to go back and walk through that, but just want to make sure we get to everyone’s questions. All right, next question. “We’re seeing a lot more U.S. investors are asking for more detailed information.” Oh, so that was I think just a comment that U.S. based investors are also asking for more detailed information, not just kind of being satisfied with the fluffier or, I hate to use the word “greenwashing,” but let’s just call it the rudimentary ESG initiatives that some folks have in place.

Okay, three framework questions. “Is it common for funds to require a particular ESG framework? If so, which ones are the most used? On what timeline, do you see a single ESG reporting framework being required by regulators?” So all good questions. SDG, that’s kind of why I brought that one up, is definitely a popular one. The UNPRI so I’ll go back to frameworks and talk a little bit about that because there seems to be some interest. As far as regulation, it’s hard to say, but all I can say is that it’s coming. So I mentioned that Goby has been in the ESG space for 12 years and we really spent the last decade in the commercial real estate and watched it go from nascency where it was kind of at this stage that we see PE in now. What does ESG mean to me? What do I need to do? What will my program look like? What are their frameworks out there? Which ones should I do? What are my peers doing? How do I benchmark against them? How do I demonstrate what my fund is doing versus my competitor? All of those things. And if I think through how that unfolded over a decade, now it’s all very civilized and mature.

There are specific frameworks for different types of asset classes. The assets get ranked based on their peer group. The LPs know exactly what to ask for and the GPs know exactly what format to report it in so it’s all mature. And there is some legislation around energy disclosure, mandatory energy disclosure for real assets and whatnot. So I don’t have a crystal ball. I don’t know when something like that might happen, but it’s just the nature of how it’s likely going to evolve over time. There will be frameworks that emerge, there will be regulation that emerges and that’s part of what we do. As a service provider, we want to help our customers because it is a lot. It’s a lot.

Drew: And, Helee, one thing I think we may see from sort of the legislative or the regulatory side, and then I’ll let you wrap up, is that it may be episodic and there may not be a template. For example, last year, there was legislation that was being drafted that would require reporting on diversity of the portfolio company boards or diversity of people in the c-suites of the portfolio companies or the management committees making the decisions at the PE fund. So you’re going to see, I think, different aspects of reporting, but if you have some sort of platform in place, it’s easy to sort of plug and play to try to get that information when we see it coming. And we will see it in advance. I mean we’re going to have several months probably advance notice that it will be coming, but having something already in place, you’ll just be so much more ahead of the curve because we do know, as Helee said, we know what’s coming.

Helee: Yeah. That’s a great point. So don’t wait until it’s here. Lay the foundation. It’s good practice anyways. Get in the good habits and then when push comes to shove, you’ll be well positioned. So I can’t thank you guys enough for the participation. There are more questions that I did not get to, but to Drew’s point, we want to be cognizant of the time. So we’ll try to follow up afterwards and make sure we get these all answered.

I think there might be one more slide. Yes, with contact information. So I’m happy to be a sounding board. I’m available at any time. Feedback, if you have questions, want to run anything by me personally, feel free to jot down my email address. It’s hlev@gobyinc.com. And then, if anyone wants to stick around, we can go through frameworks, but otherwise, Drew, maybe we’ll wrap up. I don’t want to keep anyone over time.

Drew: Great, Helee. Thanks to the Goby team for sort of putting this together. As you said earlier, we’re going to circulate this information. Feel free to follow up with Helee or her team. Feel free to follow up with us. We’re in the process of refreshing our principles for responsible investing here. So there’s a lot of activity in this space and it’s very important to us and it’s important to us to communicate a lot of this information and data that we’re gathering with policy makers and regulators on the Hill. So thanks everyone for participating today and a big thanks to Goby for taking the time to really walk through sort of another tool that people can put in their toolkit here.

Helee: Our pleasure.

ESG materiality assessments

With investors inquiring more and more frequently about what your company is doing in regard to responsible investment, how you treat employees and vendors, your dedication to sustainability initiatives, and other activities that fall under the ESG umbrella, it’s important to have answers to these questions.

An ESG materiality assessment empowers you to easily report on your current state and outline future initiatives while taking into consideration your business goals and risks. Download our guide to creating and extracting the maximum strategic value from an ESG materiality assessment.

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Chris Ogletree

Chris joined Goby in 2016, taking over generation and development of client-facing content, such as email campaigns, website administration, and marketing collateral. As Inbound Marketing Manager, he has been an integral part in Goby's rebranding project and website redesign.

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