Stockholm (NordSIP) – Complaining about the availability and quality of ESG data is commonplace among institutional investors striving to integrate sustainability aspects into their portfolios in a systematic manner. There has been considerable progress, of course. The focused efforts of specialised data providers and ESG analysts developing in-house databases have led to significant improvements in recent years. However, most of the advancement has been confined to the listed and liquid part of the investment universe. Unlisted assets, meanwhile, which often dominate institutional portfolios, still lag when it comes to providing transparent and systematic sustainability disclosures.
Determined to do something about the problem at hand, in 2020, Denmark’s largest pension company, ATP, pioneered a comprehensive questionnaire, aiming to create a database of unlisted assets’ state of sustainability. They did this in the belief that a better overview of the ESG work done by private equity and debt companies would, through dialogue, also allow ATP to support their efforts in this area. A robust ESG reporting should ultimately benefit returns, argued the pension giant, as it enhances the reputation of companies and funds and reduces the investments’ risk.
The laudable initiative is gradually gaining momentum. On 4 May, two more Danish pension companies, Industriens Pension and PenSam, announced (in Danish) that they will be joining ATP in the efforts to source ESG data from the unlisted part of the investment universe. This new development will seriously expand the scope of the database. All three companies will be using the same questionnaire and will receive the aggregated data in an anonymised form, thus providing a much larger amount of data on which to base analysis and dialogue. Naturally, each pension company will decide independently how to use the knowledge gained.
“We are convinced that this tool can give us a lot of additional knowledge about ESG issues in the unlisted investments, which we can use in our dialogue with the companies on, e.g., environmental issues and good corporate governance,” comments Peter Lindegaard, Investment Director at Industriens Pension (in Danish). “In this context, data is crucial, and we are very happy about the new collaboration,” he adds.
Claus Jørgensen, Chief Investment Officer at PenSam, echoes his sentiment. “The area of unlisted investments is the obvious next step in our ESG efforts, which are constantly evolving and where we try to be at the forefront. By becoming part of the collaboration with ATP, we are now more who can help each other strengthen active ownership and transparency in the unlisted area, which will no doubt receive more attention in the coming years,” says Jørgensen (in Danish).
The questionnaire contains topics and metrics that ATP, Industriens Pension and Pensam believe should be part of every company’s ongoing ESG work. The ambition is to set a standard for reporting on ESG within illiquid companies that other investors can use, thus reducing the reporting burden on companies.
“The more investors that participate in this work, the better the opportunity to strengthen ESG work,” concludes Mikkel Svenstrup, Investment Director at ATP (in Danish).
