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Preqin develops ESG Indicators

Anna Lyudvig
Oct. 1, 2019, 9:27 p.m.
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Preqin has developed a methodology for scoring private capital funds and investors’ portfolios based on Environmental, Social and Governance (ESG) factors.

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Preqin has developed a methodology for scoring private capital funds and investors’ portfolios based on Environmental, Social and Governance (ESG) factors.

“Preqin ESG Indicators are meant to help investors, fund managers and other private market players get on the same page with how environmental, social and governance considerations are factored into capital allocation and deployment decisions”, said Dmitri Sedov, Chief Product and Marketing Officer of Preqin.

“We designed the product to provide asset owners with a common, meaningful baseline in their conversations with fund managers about ESG across their private market investments.”

Preqin’s approach intends to foster greater transparency and engagement on ESG topics among private market participants. The approach establishes a common benchmark for measuring ESG factors across funds over time, and enables investors and fund managers to analyze their portfolios against their ESG and financial performance targets.

Preqin ESG Indicators leverage widely accepted frameworks, including the Sustainability Accounting Standards Board’s (SASB) factors and the UN Sustainable Development Goals Index.

It applies those frameworks to its proprietary industry taxonomy, private capital deals data and fund-level performance database.

This allows it to generate baseline ESG scores for a portfolio, based on the industries and geographies of the underlying assets.

Planned enhancements to Preqin ESG Indicators include incorporating additional fund-specific ESG information provided by fund managers and obtained from other data sources.

With the introduction of ESG Indicators, Preqin is transforming how private capital markets measure, benchmark and compare ESG factors across funds and how they correlate to funds’ financial performance.

“The private markets lack transparency, consistency, and comparability when it comes to understanding and evaluating ESG factors for portfolio companies”, said Jeff Cohen, CAIA, Institutional Product Strategist at The Sustainability Accounting Standards Board.

“Preqin’s ESG Indicators are helping address this challenge and are a meaningful and welcome development,” he said.

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