TMF Group’s global clients have started taking ESG issues more seriously, across all shapes and sizes of manager, according to Eisen. If investors want more ESG transpar-ency, managers have to respond in kind. 

“Investors want to see these issues advance and if you’re an emerging manager in growth mode, or a mid-sized manager aspiring to the next level, you’re going to want to make sure you can respond to investors’ needs,” he says. 

And even though private market managers have to work hard to overcome the issues of how best to gather and rank ESG data in a consistent manner, it is not as if there is a lack of data. Indeed, ESG data provided by both public and private companies continues to improve. 

One of the questions managers need to ask themselves is how best to apply ESG data across their fund portfolios, which might hold a diverse number of assets spanning industrial, software, healthcare sectors and so on. 

“The data is available but it will depend on the following: a) how efficiently it can be extracted; b) what are the standards that you determine to be the most important? and how is the data applied consistently to get an ESG ranking that makes sense across the entire portfolio, from Fund I through to Fund XX? 

For managers and allocators alike to make sense of ESG reporting, and to meaning-fully apply benchmarking, it will be necessary to rank different parts of the portfolio, at the individual sector level, using an ESG taxonomy; especially for generalist PE funds. For a specialist healthcare-focused fund, for example, the same ESG ranking could apply at the wider portfolio level. 

“For me, it really comes down to addressing the disparate opinions of what is impor-tant under the ESG umbrella, and how to apply ESG rankings to different companies operating across industry sectors,” states Eisen. 

He adds: “You could make a bold statement in your ESG policy that you only invest in companies using supply chains that have no association with human rights abuses. But how does that apply to an advertising agency, for example, where there is no supply chain? 

“There can’t be a one-size-fits-all approach. I think there will need to be a taxonomy that can be applied by GPs in different ways to different companies, based upon sector, product…things like that. But the question will always remain: ‘What is important to you?’ Is it more important to have gender diversity in senior positions? Is it more important to lower your carbon footprint, or to ensure there are no human rights issues related to corporate supply chains?”

There are so many facets to how managers need to think about ESG factors. But one thing is for sure: this is a trend that shows no sign of stopping. With climate risk, diversity and inclusion, and closer scrutiny on supply chains, all coming to the fore in recent times, managers cannot afford to take their eye off this increasingly relevant, secular theme.