The Alternative Credit Council and AIMA teamed up with other industry groups to issue an ESG tool that is to be used by borrower companies and shared with their lenders.
The ESG Integrated Disclosure Project (IDP) brings those leading industry bodies with the Loan Syndications and Trading Association (LSTA) and the United Nations-supported Principles for Responsible Investment (PRI) in the creation of a template that can be accessed online.
Founding partners of the ESG IDP include Apollo Global Management and Oak Hill Advisors.
“I am thrilled to be part of the ESG IDP as it represents an important step in addressing ongoing ESG disclosure challenges in the private credit markets,” said Michael Kashani, head of ESG credit at Apollo and the inaugural chair of the ESG IDP. “We believe that this harmonized approach will increase the availability of ESG disclosure for both LPs and GPs.”
At Oak Hill Advisors, Jeff Cohen is the head of ESG & Sustainability and was also the inaugural vice chair of the ESG IDP. He sees the IDP as aligning sponsor interests and addresses what he dubbed ‘questionnaire fatigue’ felt by companies.
“We are excited to contribute to and support the ESG IDP, which applies a credit lens to the globally-recognized SASB standards to prioritize the subset of ESG factors most likely to be core to company’s operations and, as a result, beneficial to lender underwriting,” Cohen said.
On the investor side, the ESG IDP template will help identify industry-specific ESG risks in their credit portfolios and compare meaningful data across alternative asset managers more consistently, according to the group.
The initiative is being embraced by Canadian institutional investor PSP Investments.
“The ESG Data Convergence Initiative (EDCI) supports the inclusion of EDCI metrics within the ESG Integrated Disclosure Project template,” added Catherine Isabelle, senior director of responsible investment at PSP Investments, and lead of the EDCI’s Private Debt Working Group, member of the EDCI Steering Committee. “We believe that the technology-enabled disclosure of the EDCI metrics within the template will provide better information for both LPs and GPs to drive improvement over time on critical issues.”
At AIMA, the effort is seen as reducing the burden on borrowers while improving the materiality and comparability of ESG disclosure for investors. Jiri Krol, global head of the Alternative Credit Council division at AIMA, said that they look forward to working with members and partners to support the adoption of the disclosure template.
Meanwhile, at UNPRI, the effort is also being applauded as building on its existing ESG Factor Map.
“It will streamline ESG information collection, whilst providing opportunities for meaningful conversations with borrowers,” said Carmen Nuzzo, head of fixed income at the PRI. “Its success now requires adoption, which we strongly urge, together with the other ESG IDP supporters.”