The Growing Importance of ESG Reporting in Private Markets
The environmental and social practices of businesses are influencing a growing number of investment decisions. In a recent survey by PwC, more than 80% of private equity executives said Environmental, Social, and Governance (ESG) had driven value in at least one of the past year’s deals, and one-third said it had driven value in the majority of their deals. More than half said they had decided not to pursue a deal based on ESG concerns alone. They pointed to market standing and risk management as top reasons for their ESG investment decisions — and these concerns are only increasing in the industry. Investors, regulators, and other stakeholders are demanding greater transparency, particularly regarding how businesses are managing their climate impacts and risks.
However, in private markets, ESG data has historically been difficult to access and compare. The ESG Data Convergence Initiative (EDCI) was formed to address this challenge by increasing the availability of comparable, useful sustainability data from private markets.
This article will explore why the initiative emerged, how it works, and the steps you can take to streamline your EDCI reporting process.
Challenges With ESG Reporting in Private Equity
A Need for Comparable, Meaningful Data
As scrutiny over ESG in private equity has grown, so has the demand for standardized data. Limited Partners (LPs) often lack access to consistent ESG metrics needed to assess the performance of General Partners (GPs) and underlying portfolio companies. Meanwhile, GPs have been juggling an onslaught of individual data requests, with little visibility into their standing against industry averages and peers. The problem has been compounded by data collection and validation processes that are burdensome and resource-intensive.
The EDCI was formed to bridge this gap by creating a framework for comparable and actionable ESG reporting.
What is the ESG Data Convergence Initiative (EDCI)?
An Effort to Standardize ESG Data in Private Equity
The EDCI is a global partnership of private market stakeholders committed to harmonizing the industry’s fragmented approach to gathering and reporting sustainability data. Established in 2021 by a group of LPs and GPs, the initiative simplifies ESG metrics, improves comparability, and ultimately drives sustainable value creation in private equity.
Today, EDCI encompasses more than 475 General and Limited Partners, representing $38T USD in Assets Under Management (AUM) and more than 6,000 participating companies. Members include leading private equity firms like Apollo Global Management, TPG, L Catterton, Onex, and Permira.
2025 EDCI Metrics and Reporting Guidance
A Resource for Gathering Data
The next reporting deadline for EDCI is April 30, 2025. The EDCI 2025 Metrics Guidance provides essential resources for GPs as they gather data, ensuring consistency with established industry frameworks like the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Taskforce on Climate-related Financial Disclosures (TCFD).
Below, we cover the metrics companies will need to report on in 2025, along with the guiding principles EDCI used to determine these metrics.
Key Metrics
- GHG Emissions: Organizations must disclose scope 1 and 2 emissions, with the option to disclose scope 3.
- Net Zero: EDCI asks businesses to share their net-zero strategy, targets, and ambitions.
- Renewable Energy: Companies will be asked to report the percentage of renewable energy used.
- Diversity: EDCI wants to see the percentage of women on the board and C-suite and the percentage of underrepresented groups on the board (this is optional based on region).
- Work-related Accidents: Companies must report injuries, fatalities, and days lost to injury.
- Net New Hires: Businesses will need to provide data on net new hires (organic) and total turnover.
- Employee Engagement: Respondents will be asked if they have an employee survey, and will have the option to share the employee survey response and employee sentiment and score.
Guiding Principles for Determining Metrics
In determining the updated metrics listed above, the initiative followed seven guiding principles:
- Globally Accepted. To establish metrics, EDCI drew on the most accepted and widely regarded global frameworks, including the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Taskforce on Climate-related Financial Risk (TCFD), as well as the European Union’s Sustainable Finance Disclosure Regulation (SFDR), as formalized.
- Meaningful. The metrics are intended to be relevant from a financial or societal perspective and they may be specific to a given industry.
- Comparable. Data should allow performance comparisons between portfolio companies and GPs, with adequate overlap across sectors.
- Dynamic. Metrics should develop and adapt as tracking improves and materiality evolves.
- Straightforward. To not overburden companies, and to ensure data quality and integrity, information should be simple to track accurately, with a limited total number of metrics.
- Actionable. Metrics should be tied to specific measures that fall within the control of GPs and portfolio companies.
- Objective. Subjectivity and the need for interpretation should be minimized
Best Practices for Preparing for EDCI Reporting
Laying the Groundwork for Streamlined Reporting
If you’re preparing to report to EDCI this year, there are a few critical steps that will set you up for success:
1. Understand the requirements.
Review the 2025 Metrics Guidance and make sure you understand the updated requirements. Familiarize yourself with the EDCI Data Submission Template in advance of reporting so you can ensure you capture all the necessary data points. You can cross-reference the EDCI metrics with other frameworks (GRI, SASB, and TCFD) to ensure consistency.
2. Build an internal ESG data collection framework.
Early on, you’ll want to designate a reporting team, identifying individuals or departments that will be responsible for ESG data collection, validation, and submission. It’s critical that you use a centralized system to collect, store, and manage ESG data from portfolio companies. You should also standardize data across portfolio companies, implementing clear guidelines and templates to ensure companies are reporting in a consistent manner.
3. Engage portfolio companies early.
This step can be challenging. The earlier you communicate your expectations and share the EDCI reporting metrics and guidance, the better. You can also provide training to portfolio teams using the EDCI template. You should make yourself available to portfolio companies to assist with data collection challenges or interpretation of EDCI metrics. The free carbon accounting platform Persefoni Pro can greatly facilitate this process by enabling portfolio companies to calculate and share their scope 1 and 2 inventories with you at no additional cost to them.
4. Prioritize Data Quality and Validation.
You’ll need to establish robust internal review processes and validate data accuracy before submission. You can leverage carbon accounting software like Persefoni to automate calculations, identify anomalies, and streamline the validation process. You might also want to engage a third-party auditor to ensure data integrity and further build investor confidence. You should try to build these processes with all of your reporting needs and climate-related business outcomes in mind.
5. Plan for the annual EDCI reporting cycle.
You can simplify the EDCI reporting process by creating a calendar with internal deadlines that fall well ahead of EDCI’s annual submission date. You’ll also want to regularly check in with portfolio companies to ensure they’re on track to deliver data on time. You should plan to conduct a post-submission review, analyzing data to identify trends, gaps, and areas of improvement.
6. Adopt a programmatic mindset.
Ideally, your EDCI reporting will be integrated into a comprehensive program designed to address all of your sustainability-related business outcomes. It’s helpful to take a programmatic, rather than tactical approach.
For example, a shared set of core capabilities is needed to report under EDCI (and other frameworks) and to manage the risks and opportunities arising as a result of climate change. By focusing on these capabilities, you will streamline reporting while also setting your organization up to meet future demands. It can be helpful to pair carbon accounting software with guidance from experts. For example, Persefoni Consulting Group brings a team with deep expertise in disclosure policy, securities, decarbonization, and data management, and can help you set up systems that enable you to not only meet reporting requirements but adapt to shifting markets and regulations.
EDCI as a Catalyst for ESG Advancement in Private Markets
The impacts of climate change have become nearly impossible to ignore. Against a backdrop of severe weather, natural disasters, supply chain disruptions, regulatory pressures, and other climate-related threats, scrutiny over ESG in private markets is intensifying. Investors and regulators want to know how portfolio companies are responding to the risks and opportunities arising from climate change. The EDCI aims to meet this demand by improving access to comparable, decision-useful ESG data from private markets.
Standardizing environmental data in private equity will not only serve as a catalyst for improved ESG performance — it will benefit multiple stakeholders. LPs will have better visibility into how organizations are managing their climate impacts and risks, and GPs will be able to see how portfolio companies measure up against peers — ultimately helping future-proof their investments.
Learn how Persefoni Consulting Group can help you prepare for EDCI reporting.
