Author: ESGTree

In March 2022, the United States Securities and Exchange Commission (SEC) proposed that all publicly listed US companies be mandated to report their climate data in alignment with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.

Investor demand for meaningful ESG policies and genuine transparency is undeniable. Coupled with oncoming regulation, it is a demand the private equity industry must satisfy in order to flourish in a new economy that expects socially responsible businesses.

Investor demand for meaningful ESG policies and genuine transparency is undeniable. Coupled with oncoming regulation, it is a demand the private equity industry must satisfy in order to flourish in a new economy that expects socially responsible businesses.

In February of this year, private equity multinational The Carlyle Group publicly committed to hitting net zero greenhouse gas emissions by 2050 across its entire portfolio. The commitment makes much sense; private equity and venture capital firms are ideally suited to lead the charge towards net zero. Unlike their public market asset management peers, they are more directly involved in their portfolio companies, often holding board seats, and therefore able to influence ESG strategy. Because their role is to help their companies grow, we believe it is imperative for private capital firms to build carbon accounting into the DNA of their investments.

By market size alone, impact investing might be far smaller than ESG investing, but its unique profile makes it a critical part of sustainable finance. Its obligation to actively “do good” and contribute towards a positive net change in the communities it engages, rather than concern itself purely with risk mitigation, means that the pursuit of ESG isn’t left to the machinations of pure capitalism. In fact, its unique “do active good” mandate serves as an important “best practices” guide when it comes to ESG reporting and measurement in general. This is because we’ve learned that impact investors can optimize their ESG data using the three major methods below:

The rallying cry of the American Revolution – no taxation without representation – is today taken as self-evident but deserves a re-examination in light of the climate crisis and sustainable development and ESG efforts. In fact, it could be argued that the whole field of sustainability is an example of taxation without representation.

By 2025, ESG assets are estimated to exceed USD$50 trillion. In other words, one third of Assets Under Management (AUM) will be classified as ESG assets in the next three years.Some recent developments spurring the push for ESG include: In 2020, the Big Four accounting firms launched a set of unified metrics on ESG disclosures. The same year, the Chartered Financial Association (CFA) Institute unveiled its first-ever global consultation on ESG.

The rallying cry of the American Revolution – no taxation without representation – is today taken as self-evident but deserves a re-examination in light of the climate crisis and sustainable development and ESG efforts. In fact, it could be argued that the whole field of sustainability is an example of taxation without representation.

By market size alone, impact investing might be far smaller than ESG investing, but its unique profile makes it a critical part of sustainable finance. ESG assets are on course to hit USD$50 trillion over the next three years, while impact investments are gauged to hover around USD$1 trillion. This begs the question: as ESG continues its meteoric rise, what will happen to impact investing?