The goal to create a standardised set of ESG criteria has been a priority for public market investors for some time but as the vast majority of businesses remain in private hands, how can private equity and debt managers find out about their holdings?
Andrew Pitts-Tucker (pictured) is the managing director of Apex ESG and his role involves getting ESG data for private equity/debt managers on their holdings. In reference to the number of competing standards available, Mr Pitts-Tucker told fundeye that he takes all the data points from the ‘best in class standard’ to create a dataset rather like a questionnaire.
“What that does is it's collecting all the relevant ESG data, which is in line with the United Nations sustainable development goals, in line with SFDR, etc. And then what we do is we analyse that data which will generate reports for the investor,” he said.
Given that the EU’s Sustainable Finance Disclosure Regulation (SFDR) goes live next month, there must be a clamour for these type of services. And yes, according to Mr Pitts-Tucker, his firm is signing up new clients on a weekly basis, as this is a unique service being offered. Sustainable investing is not just for the large quoted businesses, it’s also for the next generation of firms who have yet to float.
When asked about potential competitors in the space such as RepRisk which uses techniques such as web-scraping to gain an idea of companies’ ESG scores, Mr Pitt-Tucker surprises by mentioning that he actually works in unison with the firm. This partnership helps give his clients a more detailed view of the companies they hold.
“They are getting information from the company and they're also getting the outside in look from RepRisk. They're getting a fulsome view on what the company is doing from the horse's mouth, but also what the world thinks of that company which is fairly unique,” explained Mr Pitts-Tucker.
The company does not only provide ESG data for the private equity holdings but also gives scores on the investment houses themselves. While it might sound odd to see how a low polluting sector such as asset management would need a sustainability score, Mr Pitts-Tucker explained that these businesses use electricity and paper etc. As he eloquently summed up, ‘Environmental is applicable to everyone’.
The draw for this kind of data is clear, given the vast majority of companies are privately owned. Mr Pitts-Tucker gives the need and benefit for his firm in no uncertain terms, he said: “there’s a big gap in the market from investors, wanting to collect data on the private companies they're invested in or private companies that they might want to invest in so we've created a tool that they can use, and they take it to that private company and ask them to populate this data set.”
Given the surge in demand for all things ESG related, prior to Covid and perhaps heightened by the pandemic, it seems that Apex ESG has found a market that was desperately in need of a solution. Using partners and suppling what appears to be an easy to use software as a service (SaaS) model, this company may have a real winner on their hands. Lest not forget that parent company Apex recently completed their takeover of well renowned ManCo and fund administrator FundRock suggests that all is well at Apex.
