The research firm can score ESG factors for private capital funds and investors’ portfolios

Preqin ESG scoring is now an offering for companies.

Preqin established a methodology and standard benchmark. This proprietary offering rates private capital funds and investors’ portfolios based on ESG factors.

The ESG indicators can drive improved transparency and engagement in the private markets, according to the company. The firm says that a new common benchmark for ESG factors across funds will improve manager analysis. It would further help managers assess performance against ESG and financial targets.

“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 Preqin Chief Product and Marketing Officer Dmitri Sedov. “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.”

The firm leverages several frameworks to provide these factors. Inputs include factors from the Sustainability Accounting Standards Board’s (SASB) and the UN Sustainable Development Goals Index. The firm said it then applies these benchmarks to private capital deals data, a fund-level performance database, and industry taxonomy

Preqin ESG Indicators

In a recent blog post, Sedov cited the importance of transparency and ESG to the private capital markets.

He said that the industry could “bring greater transparency and information symmetry to ESG policies across the company spectrum.”

He further cited the need for greater transparency from start-ups to (small and midsize enterprises) and unicorns. “Through better data, disclosure, and reporting, private capital will be a driving force in bringing ESG investing to light,” he said.

Other industry leaders have echoed such sentiments.

“The private markets lack transparency, consistency, and comparability when it comes to understanding and evaluating ESG factors for portfolio companies,” said CAIA’s Jeff Cohen.