The challenge of accessing data on private assets now extends to ESG data. The stakes are even higher, as over the next decade, 55% of venture capitalists will be seeking direct, daily ESG updates on their portfolios, according to a study by Intertrust Group.
The pace and frequency with which data is provided has already increased significantly over the past year, but challenges remain, such as costs and data availability.
“The pace and frequency with which data is provided has already increased significantly over the past year, but challenges remain, such as costs and data availability,” Antonello Argenziano, product director at Intertrust Group, said at Luxflag Sustainable Investment Week 2022 on Tuesday, 18 October.
While data abounds for listed assets, “you can’t easily buy ESG data on private assets from a third party provider”, Frédéric Vonner, advisory partner at PWC, said during the roundtable.
This leads to “a bespoke approach” that is “difficult to industrialise”, explained Jane Wilkinson, independent director and founder of Ripple Effect.
A tailored approach is also justified, according to Wilkinson, by the need for venture capitalists to diversify the sectors included in their portfolios. “By nature, the ESG elements for the healthcare industry are different from those for technology.”
Agreeing with this observation, Vonner concluded, “For the same information, we already have several different definitions, just by listening to different players.” This complexity will continue as long as there is no unified approach.
Depending on the jurisdiction of the investors, companies may have completely different questions.
The complexity of ESG data is furthermore rooted in cross-cultural differences among investors. A European company, for example, may have Asian institutional investors as well as North American or European ones. “Depending on the jurisdiction of the investors, companies may have completely different issues,” observed Wilkinson.
“In the United States, investors are very sensitive to diversity, gender and LGBTQ issues, whereas in Europe, we are a little less so,” she said. So it’s still tricky for an unlisted company to manage all the expectations of its investors and explain to them that there may not be sufficient reason to collect data in certain areas, in the absence of a unified approach.
However, companies that have opened up their shareholder base to venture capital cannot afford to ignore ESG data reporting. It is not only about the ability of these companies to attract investors, but also to convince them to renew and increase their investments from one year to the next.
The aim of developing sustainability data systems, especially for private markets, is to create value, so that assets are best valued.
As ESG is not always seen as an end in itself, Vonner stated. “The objective of developing sustainability data systems, especially for private markets, is to create value, so that assets have the best valuation”.
While access to data for private assets is currently limited, the challenge of value creation should encourage third-party data providers to enter the private asset market, he said. With ESG issues becoming increasingly important, the limited availability of ESG data poses a risk to the valuation of assets targeted by venture capital, thereby contributing to their further illiquidity.
Originally published in French by Paperjam and translated for Delano