ESG investment in the private capital industry is becoming increasingly sophisticated – now firms need a scalable, ‘single-source’ solution

ESG investment in the private capital industry is becoming increasingly sophisticated – now firms need a scalable, ‘single-source’ solution

 

 

How has ESG investment changed in recent years?
ESG investing has come a long way in the last five years. There has been a surge in the adoption of ESG strategies by fund managers globally – across both public and private markets. The rationale on the private capital side is threefold: first, there is a growing fiduciary and regulatory duty to meet the demands of institutional investors. Second, more fund managers truly believe focusing their investment strategies along ESG lines has the potential to drive not only positive change, but attractive returns going forward. Lastly, GPs have realized that many ESG concepts, such as inclusive employment practices, build more resilient businesses even when applied to non-ESG investee companies. This increased global awareness is swiftly transforming ESG from a ‘nice to have’ into a ‘need to do.'

What role does technology play in facilitating ESG investment?
As ESG investing has moved into the mainstream, it has become more sophisticated. At the same time, there has been a lack of equivalence around approaches and methodologies – making it challenging for fund managers to engage consistently with, and effectively apply, ESG policies in practice.

In this environment, technology is critical. Historically, ESG assessment at the company level has largely been manual, Excel, or paper-report driven. This has limited the potential of the data and information collected, as well as hampered the ability of firms to make informed investment decisions cost-efficiently. We developed our own end-to-end, flexible software solution with these difficulties in mind by simplifying the process of data collection, secure storage, and visualization – wrapping it all within a comprehensive, built-in ESG methodology. Going forward, any ESG solution will need technology at its heart to drive informed action.

How should firms select technology partners?
The answer to this question depends on what stage of the ESG journey your firm is on and the level of assistance you need in carrying out your strategy. From our point of view, firms need to strike a sensitive balance between automation and human interaction when seeking an ESG solution. You need to blend the cost-efficiency of AI-driven software with the high customization and value-added capabilities of human consultancy. Ultimately, you need an end-to-end, single-source solution to ensure consistency, coherence, and accuracy at the scale you want to operate at – from regional all the way up to global.

 

About Apex Group
Apex Group is a global financial services provider with 45 offices and 3,500 employees worldwide. The Group delivers the broadest range of single-source services to asset managers, private clients, and family offices – including extensive fund and corporate services, a pioneering ESG Ratings and Advisory solution for private companies, and much more. Learn more with Apex Group's ESG Advisory video.

 

Sign up to receive updates on new Preqin ESG research and products at go.preqin.com/esg