Steven Pringle, director of member relations at GRESB, an independent organisation providing validated ESG performance data and peer benchmarks, discusses best practices for private market funds to ensure accurate ESG data and address stakeholder disclosure fatigue. He also examines the evolving role of third-party verification and its impact on the quality of sustainability reporting. This is part of a longer --ahead of the private assets conference hosted by the Association of the Luxembourg Fund Industry (Alfi)--exploring the challenges and opportunities in sustainability reporting for private market funds.

Kangkan Halder: Nowadays, there is no market conversation without the role of technological advancements, such as artificial intelligence, generative AI and big data. How do you think these aspects will play their roles in overcoming the challenges of sustainability reporting for private market funds?

Steven Pringle: Large language models and other advanced technologies are certainly playing a role in tackling the challenges of sustainable reporting. Fund managers are in the best position to address how these tools are being used.

In terms of transparency and comparability, what improvements do you foresee as necessary for private market funds to enhance their sustainability reporting?

Private market funds can enhance their sustainability reporting while benefiting from industry insights by following a standardised ESG framework like GRESB that prioritises transparency and comparability. This approach results in improved disclosures that align well with investor expectations and regulatory requirements.

As part of GRESB, an ESG performance and ranking platform, how can private market funds address the challenge of measuring and reporting on social and governance factors, which are often more subjective than environmental metrics?

GRESB’s ESG standards are owned and governed by the independent GRESB Foundation, which collaborates with industry representatives to determine which social and governance issues are most material to the industry and should be covered by the assessments. This approach means that every participating entity collects the same type of social and governance data, making comparisons of what are often seen as subjective metrics more consistent and meaningful.

A critical best practice for any entity is to ensure that they have a robust data collection process in place

Steven Pringle, Director of member relations , GRESB

Do you recommend best practices that private market funds can adopt to ensure the accuracy and reliability of their sustainability data?

While GRESB provides all participants with assessment guidance and other resources like case studies, a critical best practice for any entity is to ensure that they have a robust data collection process in place and that they take advantage of support services that can help them better understand how to improve their overall participation.

How do you see the role of third-party verification evolving in the context of sustainability reporting for private market funds?

Third-party assurance of sustainability reporting is already emerging in the EU. For example, under the Corporate Sustainability Reporting Directive (CSRD), all sustainability information reported must be assured by an independent third party. This requires that an impartial, reliable and knowledgeable third party review the data to ensure its accuracy and reliability. This is known as ‘limited assurance’, and although it is less strict than a financial audit, it nevertheless still requires working with a sustainability reporting partner organisation. Further evolution and higher standards than ‘limited assurance’ may develop thereafter.

Verification of data will increase the quality of sustainability data, and GRESB is starting to reward the ability to verify or assure ESG performance data in its assessments, which is an ongoing process.

Finally, what strategies can private market funds use to balance the need for comprehensive sustainability reporting with the risk of disclosure fatigue among stakeholders?

For most organisations, a targeted approach is advisable--ensuring that your reporting efforts help drive engagement with investors while going into detail in the areas that are most material to your organisation.

An alternate version of this article will appear in the October 2024 supplement of Paperjam magazine