Preqin ESG Solutions Methodology
The alternative investments market is private and, therefore, inherently opaque.
Preqin ESG Solutions 1 Preqin ESG Solutions Methodology Document Make sustainable investing decisions with con昀椀dence ↗ Back to Contents
Preqin ESG Solutions 2 Contents 3 Introduction to Preqin ESG Solutions 7 Why Preqin ESG Solutions? 11 Module I: ESG Pro昀椀les 15 ESG Transparency KPIs 18 ESG Fund Labels 20 LP ESG Mandates 21 GP Regulatory Disclosures 22 ESG A昀케liations 23 ESG Contacts 24 Data update 25 Module II ESG Risk Analytics 26 ESG Risk Exposure Estimates 34 Modifying industry risk with geography 36 Private Company ESG Risk Metrics 51 Module III: Impact Potential 52 The challenge of measuring impact 54 Identi昀椀cation and classi昀椀cation of future impact 60 Data update process 61 List of abbreviations and ESG terms 63 Appendix A 70 Appendix B 73 Appendix C
Preqin ESG Solutions 3 Introduction to Preqin ESG Solutions The alternative investments market is private and, therefore, inherently opaque. De昀椀nitions and reporting are less regulated and standardized than on the public markets. It also relies on relationships. To invest in a new portfolio company, run a successful founding round, or acquire proprietary information, you need to have the right connections. An additional di昀케culty, inherent to sustainable investing, is that stakeholders disagree on what ESG is or should be. As a result, even when private market ESG data is disclosed, it is non-standardized, non- conformable and mired with transparency issues. In practice, this means it cannot be compared against data points from other entities or aggregated at a portfolio level. At the same time, the pressure to consider sustainability factors in the investment process is mounting. Stakeholders expect transparency regarding where and how the growing capital in昀氀ows into the alternatives market are invested. Institutional investors and fund manager 昀椀rms are required to comply with external regulations. Our clients’ interest in alternative investments may be a response to shareholder expectations, their clients’ reporting requirements, or simply seeing an opportunity in creating sustainable products. No matter the driver, they need a sustainability strategy – and its key ingredient is reliable ESG data. The purpose of Preqin ESG Solutions is to unlock the power of non-昀椀nancial data points to enable our clients to make informed and future-resilient investment decisions. ↗ Back to Contents
Preqin ESG Solutions 4 Preqin ESG We deliver standardized, comparable, and actionable ESG data that can easily be embedded into our clients’ investment Solutions work昀氀ows. Preqin ESG Solutions delivers value in four key value dimensions. • Search costs – cut the amount of resources, necessary to conduct fundraising, pre due diligence, or target list creation • Barriers to entry – benchmark yourself against your peers, and compare the degree of ESG integration across the market, avoiding prohibitive costs in terms of time and money • Time advantage – spot under-the-radar opportunities faster, and gain or maintain market edge by streamlining fundraising, pre due diligence and target list creation • Signal generation – identify potential impact investments, and highlight the areas where ESG risk exposures build up, or where ESG governance is insu昀케cient To gather ESG-related data points from every possible corner, we leverage our relationships with private markets participants. Where these data points do not exist, we provide you with their viable estimates, based on multiple auxiliary data sources (both proprietary and public) and innovative models, developed by our ESG team. All our ESG products are built on a foundation of Preqin Pro – the industry’s most comprehensive database of top-quality private market 昀椀nancial data. Our ability to merge informed proxies with 昀椀nancial data enables us to deliver solutions that scale – from a single asset, through portfolio and fund managers, up to institutional investor level. What we o昀昀er is comparable metrics that seamlessly integrate into both fund manager and institutional investor work昀氀ows. Preqin ESG Solutions breaks down barriers to entry to investing in alternative markets. You may be new to ESG investing or lack the in-house resources to give you insight into the ESG landscape. Our dedicated ESG research team do the research so you don’t have to. ↗ Back to Contents
Preqin ESG Solutions 5 Product The functionality of Preqin ESG Solutions is delivered through modularity three modules: • ESG Pro昀椀les quanti昀椀es, visualizes, and compares the key aspects of ESG management across fund managers and institutional investors active in the alternative assets industry. • ESG Risk Analytics measures the exposure of an investment to ESG factors that could materialize as costs. It also delivers proxies of private companies’ performance against risk across three key sustainability factors: carbon emissions, water withdrawals and employee turnover. • Impact Potential streamlines initial evaluation of the potential future positive impact of the components of your portfolio. Synergies Our ESG modules synergize on three di昀昀erent levels. At the level of an individual asset, ESG Risk Analytics and Impact Potential complement our Company Intelligence and Asset Level Benchmarks o昀昀ering with actionable, non-昀椀nancial data. The Company Intelligence module provides information regarding an asset’s performance, 昀椀nancials, management team and the new fundraising rounds. Anonymized, aggregated Asset Level Benchmarks enable alternative assets professionals to compare their investments with that of other market players. Additional data on ESG risk exposures, performance against sustainability risks and impact potential provides you with a 360-degree view of an asset and its performance in di昀昀erent scenarios. At the level of an investment fund and its portfolio, ESG Pro昀椀les, ESG Risk Analytics and Impact Potential modules complement our private capital dataset and Private Capital Benchmarks o昀昀ering. Our private capital dataset provides information on investment strategies, investment preferences and portfolio composition of fund managers and individual funds. It also enables Preqin Pro users to track fund manager’s previous investments. Non-anonymized Private Capital Benchmarks enable our clients to compare a fund’s performance against its peers. ↗ Back to Contents
Preqin ESG Solutions 6 Additional data on commitments, compliance, ESG practices and ESG team enables clients to verify not only if a fund manager has a sustainability policy, but also if it has the prerequisites for this policy to be successful. Considered together, these elements give clients a full picture of a fund and the practices of its management. At the level of institutional investor, the ESG Pro昀椀les module complements our comprehensive private capital dataset and Insights+ o昀昀ering. The private capital dataset provides detailed information on each allocator’s past investments, mandates, investment preferences and strategies. The Insights+ service provides our clients with investor outlook, allocator news and exclusive research insights. Additional information on investors’ ESG mandates, their ESG management practices and a昀케liations, and the ESG team itself, provides our clients with a detailed picture of each investor’s management practices. ↗ Back to Contents
Preqin ESG Solutions 7 Why Preqin ESG Solutions? Quite simply Our core strength is the ability to foster and expand our because we relationships with the key market participants. After more have the than 20 years of collecting, verifying, and curating disclosed information, our database, which provides comprehensive relationships, coverage1 of 昀椀nancial data on the alternatives market, is expertise, considered best-in-class. As the leading provider of alternative experience, investments data, we are in a unique position to deliver sustainable investment solutions built on this foundation. and data. To be certain we’re focusing on what our clients need, we have assembled an ESG Advisory Council, consisting of academics with expertise in private markets and ESG, as well as 15 to 20 fund managers, institutional investors, and service providers, representing $3.4tn in assets under management. Feedback from the Council, which meets annually to discuss our research and development process, ensures our product re昀氀ects the best practices of sustainable investment and is aligned with the requirements of private market practitioners. We have years of hands-on private markets experience in supporting alternatives professionals with data, insights, and market intelligence. We understand how critical a core set of reliable, actionable ESG data points is for sustainable investment. That is why we built a strong, dedicated ESG team to gather sustainability-related data points from every possible corner. Where these data points do not exist, we provide you with viable estimates, based on multiple auxiliary data sources (both proprietary and public) and innovative in-house models. ↗ Back to Contents
Preqin ESG Solutions 8 Our ESG research capabilities allowed us to deliver solutions that scale all the way from a single asset, through a portfolio and a fund manager, up to an institutional investor level. As a result, our ESG products can be seamlessly integrated into pre-existing investment work昀氀ows, such as fundraising, fund allocation, or benchmarking. It’s the comprehensive database of 昀椀nancial data on private markets underpinning our ESG products that makes this commercially viable. Our core data capabilities make us uniquely positioned to provide a layer of ESG insights on top of everything we deliver. In 2022 we were con昀椀rmed as #1 provider of Benchmark Tools & Datasets by Probitas Partners and recognized as the Best Private Equity Firm Database at Wealth & Finance International Fund Awards. This year we have already won Best ESG Data Provider and Best ESG Research: Vendor at the ESG Investing Awards. We were also 昀椀nalists in the categories of Best Specialist ESG Research and Best Specialist ESG Data Provider. Our ESG and data solutions are a subject to continuous improvement and already widely recognized as excellent. We are delighted to invite you on a guided tour around our ESG Solutions, and to further accompany you along the road to sustainable investments in the private markets. 1 Covering: 200k+ Portfolio Companies, 60k+ institutional investors and fund managers, 100k+ Private Capital funds, and 100k+ Real Assets. 200k+ 60k+ Portfolio Companies institutional investors and fund managers 100k+ 100k Private Capital funds Real Assets ↗ Back to Contents
Preqin ESG Solutions 9 Achievements and accolades — 2023: • ESG Investing Awards: Winner – Best ESG Data Provider, Best ESG Research: Vendor; Finalist – Best Specialist ESG Research, Best Specialist ESG Data Provider. • Investment Week Sustainable Investment Awards: Finalist - Best Sustainable Investment Thought Leadership Paper ('ESG in Alternatives 2022: The Transparency Tipping Point'), Best Sustainable Investment Research Team, Best Sustainable Investment Research & Ratings Provider • Environmental Finance Sustainable Investment Awards 2023: Winner - ESG Research of the Year (Europe) — 2022: • Probitas Partners 2023 Institutional Investors Private Equity Survey: Winner – #1 for Benchmark Tools & Datasets • Wealth & Finance International Fund Awards: Winner – Best Private Equity Firm Database • Investment Week’s Sustainable Investment Awards: Finalist – Best Sustainable Investment Research & Ratings Provider • Investment Week’s Women in Investment Awards: Finalist – Shifra Ansono昀昀 is a 昀椀nalist for Team Leader of the Year • A-Team Group ESG Insight Awards: Shortlisted – Best Overall ESG Data Provider, Best ESG Research Provider, Best ESG Risk Data Provider, and Best Analytics Provider for ESG • Traders Magazine Markets Choice Awards 2022: Shortlisted – Best New Product for ESG Solutions Real Deals ESG Awards: Shortlisted – ESG Data Provide ↗ Back to Contents
Preqin ESG Solutions 10 • Megabuyte100 Awards: Shortlisted – Banking and Insurance (Software and Digital Platforms) • ESG Investing Awards: Runner Up – Best Specialist ESG Data Provider — 2021: • Alt Credit European Performance & Services: Finalist – Best Data and Information Provider — 2020: • ESG Investing Awards: Finalist – Best Specialist Data Provider • WealthBrie昀椀ng European Awards: Best Data Provider ↗ Back to Contents
Preqin ESG Solutions 11 Module I: ESG Pro昀椀les Preqin’s ESG Pro昀椀les module enables you to quantify, visualize, and compare the key aspects of ESG management across fund managers and institutional investors active in the alternative assets industry. The extent to which ESG is integrated into the business management practices of fund managers and institutional investors varies in scope, depth, implementation, and transparency level. We wanted to give our clients a way to meaningfully compare ESG practices disclosed by 昀椀rms operating in the opaque private markets. Preqin’s ESG Pro昀椀les module, our 昀氀agship solution, enables clients to quantify, visualize, and compare key ESG-related aspects of corporate governance across di昀昀erent actors in alternative assets industry. The purpose of this module is to provide you with actionable data points that assess ESG integration within an organization. This makes it easier to create targeted fundraising campaigns, gather intel on your competitors, and benchmark yourself against the market. It can also help you pinpoint weak or insu昀케cient spots in ESG policies, identify funds that match your desired pro昀椀le, and improve stewardship. Our ESG Pro昀椀les module consists of six components. Each component gives our clients visibility of a single ESG-related aspect of a strategy, pursued either by a fund manager, or an institutional investor. The components cover: • SG policies and practices • Regulatory disclosures • Public commitments through notable third-party memberships ↗ Back to Contents
Preqin ESG Solutions 12 • Fund labels • Investment mandates • Contact details to the ESG team Considered jointly, these six components make up a 360-degree view of a 昀椀rm’s sustainability standards and practices. Our ESG Pro昀椀les module enables you to evaluate the level of ESG integration in a fund manager or institutional investor 昀椀rm and compare that against the market. In the opaque world of alternatives, where recognized standards do not exist and disclosure data is not available, a uni昀椀ed approach to the assessment of ESG integration and sourced the data is essential – and this is what we have developed. To understand what best practice in alternatives could look like, our ESG research team adapted recognized public market methodologies for the nuances of private markets. First, we identi昀椀ed a common set of KPIs critical to the evaluation and comparison of ESG management across 昀椀rms, which we subsequently used. Next, we collated disclosures and direct submission from the 昀椀rms themselves, standardizing and curating all the sourced data. Finally, we ran the data of every fund manager and institutional investor listed on our platform through this framework, and made the results easily accessible. This task, which required a substantial amount of expertise, eradicated a barrier to entry regarding the assessment of ESG integration across the entire alternatives market that our clients might 昀椀nd too costly or time consuming to surmount. As a result, Preqin Pro became the only database on the market with private market ESG data on fund managers and institutional investors at scale. It is the only standardized tool, and therefore the point of reference, for investigating what “ESG for fund managers and institutional investors” means in practice. Our ESG pro昀椀les provide an account of the management practices 昀椀rms have in place, although they do not measure how well these standards are implemented. At the time when we compile this document the functionality of ESG Pro昀椀les module remains unrivalled, since there is no other place on the market to obtain comparable data. ↗ Back to Contents
Preqin ESG Solutions 13 Highlighted ESG Pro昀椀les for Investors use cases • Identify funds pursuing strategies aligned with your ESG mandate through ESG Fund Labels. Use the information on market-wide availability of sustainable investments to understand where your peers are invested and in which direction the capital 昀氀ows. • Find out which fund managers have ESG-integrated investment work昀氀ows by considering the ESG A昀케liations, ESG Transparency KPIs and ESG Contacts components. Use this information to screen fund managers prior to capital allocation, to monitor funds, and during further engagement. Finally, leverage it to enrich your research before another round of annual portfolio monitoring. • If you are committed to Net Zero, you need to monitor carbon emissions along your entire investment chain and that means pinpointing fund managers who have pledged to manage their Scope 3 emissions with ESG A昀케liations. Next, shortlist the funds that track and actively manage their carbon footprint. • Identify ESG policies that are insu昀케cient given fund manager’s ESG risk exposures by combining the use of Transparency KPIs with ESG Risk Analytics. This gives you the ammunition to initiate a conversation with the fund manager, should you wish to do so, and improve your stewardship as a result. ESG Pro昀椀les for Asset Managers • If you are fundraising, create a target list of potential investor entities by using ESG Mandates of institutional investors. • Identify weak spots of your ESG policies and practices by checking your competitors’ Transparency KPIs. Next, improve your game to attract investors. • If you work in a team creating funds, use ESG Fund Labels to gauge market appetite for a strategy of your choice based on the products o昀昀ered by your competitors. The detailed intelligence we provide encompasses strategies, ticket sizes, sectors, and geographies they are invested in. ↗ Back to Contents
Preqin ESG Solutions 14 ESG Pro昀椀les for Service Providers • Use ESG Contacts to reach out to prospective new clients. • Inform your advisory with a database of comparable ESG Pro昀椀les that enables seamless benchmarking and market movement analysis. For the sake of brevity, we refer further to institutional investors as to Limited Partners (LPs), and to fund managers as to General Partners (GPs). The ESG Pro昀椀les module covers six datasets: • ESG Transparency KPIs: A collection of policies and practices, tracked across GPs and LPs, that indicate how sustainability is managed across their organization and their investments. • ESG Fund Labels: A collection of ESG-related funds in market according to the following classi昀椀cation tags: ESG Integration, Impact, European Union Sustainable Finance Disclosure Regulation (SFDR) Article 8 and Article 9, United Nations Sustainable Development Goals (SDGs), Climate, and Sharia Compliant. • LP ESG Mandates: Information on LPs’ active investment mandates by asset class that incorporate ESG-related expectations. • GP Regulatory Disclosures: A collection of asset managers’ ESG-related regulatory disclosures aligned to global reporting mandates. • ESG A昀케liations: A collection of notable sustainability third-party a昀케liations and industry groups, tracked across GPs and LPs, that indicates their ESG priorities and commitments. • ESG Contacts: Key ESG points of contact at GP and LP 昀椀rms. The sections that follow explain their purpose and features, as well as their common use cases and our data-collection processes. ↗ Back to Contents
Preqin ESG Solutions 15 ESG Transparency KPIs The Transparency KPI component covers any ESG policies, management practices, and rules of doing business that have been disclosed and updated within the past 2 years. Fund managers can use it to pinpoint areas of ESG governance where they are weaker than their peers – and, therefore, where improvements need to be made to attract investors. Institutional investors can use Transparency KPIs, in conjunction with the ESG A昀케liations and ESG Contacts components, to identify fund managers with an ESG-integrated investment work昀氀ow. Used in tandem with our ESG Risk Analytics module, Transparency KPIs enable you to highlight ESG policies that are potentially insu昀케cient, if their ESG-related risk exposure doesn’t tally with stated policies or commitments. Transparency KPIs identify and track indicators relevant to ESG policies, practices and initiatives of GPs and LPs. There are 37 indicators for GPs, and 12 for LPs. By leveraging established ESG frameworks and standards, Preqin has curated a set of core ESG data points, speci昀椀cally applicable to private markets. Relying on valuable input from our ESG Advisory Council, comprised of more than 50 clients who partner in our research and development program, this product was designed to incorporate and build upon existing domain knowledge. KPIs were sourced from the following frameworks: • The Sustainability Accounting Standards Board (SASB) • List of indicators as part of the Materiality Map for Asset Management sector ↗ Back to Contents
Preqin ESG Solutions 16 • The United Nations Principles for Responsible ......Investment (UNPRI) • List of indicators as part of standardized UNPRI Transparency Reports for 昀椀rms • List of questions and best practices from UNPRI Technical Guide for Limited Partners • List of questions from UNPRI LP Responsible Investment DDQ • The Task Force on Climate-related Financial .....Disclosures (TCFD) • List of questions from the TCFD Recommendations • Institutional Limited Partnership Association (ILPA) • List of questions from the ILPA Due Diligence Questionnaire • Public market ESG Ratings providers • List of indicators commonly applied to public market ESG rating analysis We identi昀椀ed 37 indicators as being relevant to ESG integration in private markets. To create custom 昀椀lters for various use cases, each indicator has been categorized according to the following tags: • Governance Type: Tags indicating whether the indicator is primarily related to 昀椀rm, portfolio, or asset-level governance. • ESG Pillar: Tags indicating whether the indicator is primarily related to environmental, social, or governance pillars. • ESG Theme: Tags indicating the SASB material issue or theme, as well as themes speci昀椀c to private markets. • ESG Framework: Tags pointing to the frameworks from which the indicator is sourced. A full list of transparency indicators and their guidance is included as Appendix A. Additionally, we calculate the percentage of fund managers on Preqin Pro that have publicly or privately disclosed each of the 37 indicators. This ratio informs our clients about market-wide disclosure rates – what we call frequency. ↗ Back to Contents
Preqin ESG Solutions 17 Generating The ESG transparency metric for each GP pro昀椀le, which captures the percentage of ESG KPIs that are publicly or the ESG privately disclosed, is calculated as follows: transparency Number of ESG KPI's disclosed metric Preqin ESG transparency metric = 37 Preqin’s ESG transparency metric provides an indication of how transparent a 昀椀rm is in relation to core ESG facets. Our search functionality enables clients to compare between 昀椀rms according to a variety of ESG criteria, including: • A 昀椀rm’s overall ESG transparency percentage • Disclosure of speci昀椀c Transparency KPIs • Transparency KPI Governance Type (at 昀椀rm, portfolio, or asset level) • ESG A昀케liations Other core 昀椀lters from the wider Preqin o昀昀ering include, but are not limited to: • Assets Under Management • Asset Class • Location • Strategy • Sector • Geographic exposure ↗ Back to Contents
Preqin ESG Solutions 18 ESG Fund Labels If you are tasked with ESG funds in the market are identi昀椀ed – and tagged – creating a new fund, according to seven common types: ESG Fund Labels enables you to benchmark your • ESG Integration: Funds that consider environmental, social o昀昀ering against the and governance principles in their investment strategies. competition, so you These may encompass ESG as a whole or the E, S or G can better position the individually, with 昀椀nancial returns remaining the funds’ new fund in market primary directive. and strengthen your • Impact: Funds focused on generating positive social or fundraising. environmental e昀昀ects. These funds are generally values- driven and pursue societal or environmental objectives If you are an institutional complementary to 昀椀nancial performance. investor, this component enables you to discover • SFDR Article 8: Funds de昀椀ned by the European Union's strategies and investment Sustainable Finance Disclosure Regulation (SFDR) as funds that align with your promoting environmental and/or social matters without ESG mandate. having sustainable investment as its primary objective (e.g. not impact funds). What quali昀椀es as promotion: • Any disclosure or provision of information and an “impression” that the investments pursued by a fund also consider speci昀椀c environmental or social characteristics • Principal Adverse Sustainability Indicators (PASIs) integrated into investment decisions) integrated into investment decisions Other criteria: 1. A fund must be subject to binding criteria in relation to its environmental and/or social characteristics; mere integration of sustainability risks is not su昀케cient 2. Investee companies must have good governance practices ↗ Back to Contents
Preqin ESG Solutions 19 • SFDR Article 9: Funds whose objective, as de昀椀ned by the European Union's Sustainable Finance Disclosure Regulation (SFDR), is either sustainable investment or reducing carbon emissions. What quali昀椀es as sustainable investment: • Any disclosure or provision of information and an “impression” that the investments pursued by a fund also consider speci昀椀c environmental or social characteristics • Principal Adverse Sustainability Indicators (PASIs) integrated into investment decisions) integrated into investment decisions • SDG: Funds seeking investments in assets aligned with the United Nations Sustainable Development Goals (SDGs). • Climate: Funds focused on supporting the mitigation of climate change. • Sharia Compliant: Faith-based funds compliant with Sharia Law and the Islamic religion’s principles it represents. Sharia funds do not invest in companies that deal with the production of weapons, alcohol, pork, gambling and tobacco. Their key principles include promoting businesses that bene昀椀t society and investments with increased transparency. Sharia rules preclude short-selling and excess leveraging, and prohibit the trading of derivatives or futures. When is a fund tagged? Funds are tagged in the following instances: Other criteria: 1. The tag label (e.g., ‘Impact’) is included in the fund’s name. 2. Marketing materials or other collateral explicitly identify the fund with a tag label. 3. GPs self-declare their fund to be associated with a tag label. ↗ Back to Contents
Preqin ESG Solutions 20 LP ESG Mandates LP ESG Mandates provides information on the ESG mandates of institutional investors active in the alternatives market. If you are a fund manager, or a placement agent or prime broker fundraising on their behalf, access to LP ESG Mandates enables you to create target lists of entities who are likely to invest with you. LP ESG Mandates enables our clients to identify LPs who have announced their commitment to investing in ESG-aligned funds or assets within the next 12 months. Leveraging our strong client relationships, Preqin’s Investor Research team collects proprietary information direct from LPs regarding their investment plans for the next 12 months. This dataset includes: • Types of managers they plan to invest with • The number of funds they plan to invest into • Asset classes • Strategies to be employed • Locations and markets • Industries LP ESG Mandates then builds on this dataset by tagging 昀椀rms committed to including ESG in their investment plans during the indicated period. Clients get to see a list of entities committed to directing capital towards ESG investments and a tally of the total proposed allocations. ↗ Back to Contents
Preqin ESG Solutions 21 GP Regulatory Disclosures GP Regulatory Disclosures provides an overview of a fund manager’s adherence to ESG regulatory requirements. This dataset currently covers the EU Sustainable Finance Disclosure Regulation (SFDR), which is binding as of 2022, and will be expanded to cover other global regulations as they are introduced. GP Regulatory Disclosures seamlessly integrates fund sourcing and due diligence with regulatory compliance. Preqin’s Regulatory Disclosures tracks 昀椀rm-level disclosures mandated by regulatory bodies. Our dataset currently includes the following, collected through the public domain by Preqin’s ESG Research team: • SFDR Article 3: Disclosure of a 'Sustainability Risk Policy' that includes information on the integration of sustainability risk considerations in the 昀椀rm's investment decision-making process. • SFDR Article 4: Disclosure of a 'Principal Adverse Impacts Statement' (PAI) that includes a due diligence assessment of sustainability impacts. Alternatively, disclosure of the 昀椀rm's rationale for not publishing it. • SFDR Article 5: Disclosure of remuneration policies that include information on how the 昀椀rm integrated its consideration for sustainability risks. We aim to expand the list of disclosures as they are introduced by regulatory bodies. ↗ Back to Contents
Preqin ESG Solutions 22 ESG A昀케liations To commit to an a昀케liation, 昀椀rms need to dedicate time and resources to integrate ESG into their practices. As a result, a昀케liations indirectly signalize management priorities. If you are an institutional investor, the ESG A昀케liations component – in conjunction with Transparency KPIs and ESG Contacts – enables you to identify fund managers with ESG-integrated investment work昀氀ows. If you are committed to Net Zero, it indicates which fund managers have pledged to manage their Scope 3 emissions. This information enables you to quickly shortlist the funds which track and actively manage their carbon footprints. Based on their prevalence in the industry, we amassed an extensive dataset tracking 40+ third-party organizations to which LPs and GPs are a昀케liated. Preqin’s ESG Research team collects this information from the public domain and includes it on both LP and GP ESG pro昀椀les. For each organization we calculate the percentages of the universe of, respectively, 60k+ LPs and GPs featured on Preqin Pro who are a昀케liated with it. While conducting this calculation, we consider only 昀椀rms with at least a single a昀케liation. The resulting ratio informs our clients about the extent to which the standards promoted by this organization permeate the market. Akin to terminology of Transparency KPIs, we call this data point frequency. An institutional investor or fund manager’s association with a speci昀椀c organization can provide further insight into a 昀椀rm’s ESG practices, indicating obligations that are perhaps otherwise not publicly disclosed. For a full list of a昀케liations currently tracked by Preqin please see Appendix B. ↗ Back to Contents
Preqin ESG Solutions 23 ESG Contacts The ESG Contacts component enables you to directly reach out to key players on the ESG scene, providing a target list of contacts that can be instrumental in your business development. The availability of an ESG contacts is also an indirect indicator of how serious an organization is about the role of ESG in its investment work昀氀ow. The existence of ESG teams within fund managers and institutional investor 昀椀rms is a recent phenomenon. As it becomes more mainstream, we map the presence of ESG capabilities and expertise within organizations. The ESG Contacts component enables you to not only verify if a 昀椀rm has a dedicated ESG team, but also access personal details and contact details of various team members. This intel enables you to research individuals’ backgrounds and trace their career paths, as well as gain insight into how the team was created and has grown. This is critical information when it comes to evaluating ESG capacity and expertise within an organization. ↗ Back to Contents
Preqin ESG Solutions 24 Data update Preqin has a dedicated ESG Research Team responsible for data collection. Our transparency pro昀椀les are populated with data sourced in one or both of the following ways: • Public disclosures: Information available in the public domain including legal 昀椀lings, regulatory disclosures, sustainability reports, 昀椀rms’ websites, and other related documents. All the sources are identi昀椀ed and manually validated by our team of dedicated ESG researchers and quality assurers. To uphold quality and consistency, all disclosures must satisfy the criteria outlined in the ESG Transparency KPIs Guidance in Appendix A. This guidance was written to enhance the transparency of our data-collection process and to provide our clients with documentation enabling deeper engagement. • Private disclosures: Private documents shared with Preqin that satisfy the same criteria as public disclosures. This feature of ESG Pro昀椀les allows for a more comprehensive representation of a 昀椀rm’s ESG e昀昀orts. To guarantee data quality while respecting our clients’ privacy concerns, all the documents are securely submitted to Preqin’s ESG Research team via our encrypted document-storing capabilities. Next, they are reviewed internally, to ensure the required criteria are met, and that any private disclosures are re昀氀ected on 昀椀rm pro昀椀les without a source. This unique data-collection process leverages Preqin’s strong relationships with our clients and our esteemed reputation in the industry. We update ESG Transparency Pro昀椀les with both public and private disclosures every 12-18 months at most – or on request. For a disclosure to be valid, all the supporting documents must have been updated in the past two years. ↗ Back to Contents
Preqin ESG Solutions 25 Module II ESG Risk Analytics process The ESG Risk Analytics module consists of two components: • ESG Risk Exposure Estimates measures an investment’s exposure to ESG risk factors, which in the future could materialize as costs. To capture the exposure, we identify the sources of risk, then evaluate their relative magnitude. • Private Company ESG Risk Metrics measures performance against risk across three key sustainability factors. It provides our estimates of carbon emissions, water withdrawal and employee growth and turnover for private companies. ↗ Back to Contents
Preqin ESG Solutions 26 ESG Risk Exposure Estimates The recognition of sustainability factors in investment has put in a spotlight a spectrum of risks the structured approach to which is pivotal to company’s long-term success. These risks are characterized by double materiality12 – that is they are material either from a 昀椀nancial, or an impact perspective (or both). Full risk assessment is an essential pre-cursor to committing to any deal, since errors can be very costly. The recent bankruptcies of Theranos and FTX exemplify the consequences of a failure in governance, which is a central 2 area of sustainability risk management.3 Preqin Pro data indicates these companies had considerable exposure to Leadership and Governance as well as Business Model and Innovation risk – issues which should have been 昀氀agged during a thorough pre due diligence. Sustainability risks are hard to quantify, however. They are particularly daunting in the case of private markets, where the proprietary portfolio company-level data available to fund managers is not universal, standardized, or su昀케ciently granular. Another challenge is to capture sustainability risks at di昀昀erent levels – from individual portfolio companies, through investment portfolios, up to institutional investor 昀椀rms. This section describes how Preqin’s ESG Risk Exposure Estimates address these issues. 2 A sustainability matter is said to be “double material” if it is material from either the impact perspective, or the 昀椀nancial perspective, or both perspectives. 3 Described by the new FTX chief as a “complete failure of corporate controls”. ↗ Back to Contents
Preqin ESG Solutions 27 Highlighted ESG Risk Exposure Estimates for Service Providers use cases • Build target lists of prospective investments for fund managers you are advising, using criteria provided by your clients • Assess funds’ ESG risk exposure pro昀椀les to o昀昀er your institutional investor clients tailor-made risk management strategies ESG Risk Exposure Estimates for Fund Managers • Build target lists of prospective investments that match your desired ESG risk exposure pro昀椀le • Evaluate risk exposures underlying prospective deals to identify the most material ESG factors and enhance your engagement during pre due diligence • Expedite and decrease the cost of early assessment of private portfolio companies before you sign a non- disclosure agreement • Members of an investment team can identify areas requiring additional disclosures and develop action plans for areas where ESG risk exposures are material • Build decks for institutional investors, in which you compare your portfolio against risk exposures of your competitors, thereby enhancing investor relationships • Monitor build-up of ESG-related risk exposures across your entire portfolio and identify blind spots within your risk management procedures ESG Risk Exposure Estimates for Investors • Highlight areas where material ESG risk exposures build up, and prioritize and enrich your research before another round of annual portfolio monitoring meetings • Identify funds’ ESG risk exposures that are not su昀케ciently covered by fund managers’ ESG policies using Transparency KPIs ↗ Back to Contents
Preqin ESG Solutions 28 • Monitor ESG risk year-over-year with annually updated exposure and performance estimates, even when information provided by the fund you’re invested in is limited. The main purpose of ESG Risk Exposure Estimates is to ESG risk measure an investment’s exposure to ESG risk factors. The key exposure stakeholders exposed to this risk cover a broad range – from 昀椀rms, their shareholders and employees, through municipalities and how we and governments, to the natural world. To evaluate ESG risk exposure, we 昀椀rst identify the sources of risk, then evaluate measure it their relative magnitude – which could materialize as costs to individuals and 昀椀rms, and damage (impact) on the natural world. We begin by calculating ESG risk exposure at the portfolio company level, for the 245,000+ private companies on our database. • Every time an investment fund makes a deal, it acquires a fraction of an existing business. • The pre-existing risk at the level of the acquired company contributes to the risk of the resulting investment portfolio. This, in turn, enables us to identify exposure to risk at the level of a particular fund. • Since each fund has an identi昀椀ed owner, the 昀椀nal step of the aggregation provides an overview of material ESG risk exposure at the level of an individual fund manager 昀椀rm. The risks identi昀椀ed as the most prominent for a given fund or a speci昀椀c fund manager are deemed to be the most likely to generate surprises, adversely a昀昀ecting stakeholders. We refer to this holistic process of quantifying risk at di昀昀erent levels as ‘measurement of risk exposure at scale’. Preqin ESG Risk Exposure Estimates is the only solution on the market that measures ESG risk exposure at scale on private markets – whether that’s a single deal, a portfolio or at institutional investor level. Risk measurements range from 1 to 10, with 10.0 representing the highest and 0.0 the lowest. Comparing scores within a single portfolio company gives an insight into “how material a given ESG issue is relative to others – whereas comparing scores across portfolio companies reveals “how material a given issue is to this company relative to other portfolio companies”. ↗ Back to Contents
Preqin ESG Solutions 29 • Signi昀椀cant variations in scores within a portfolio point to blind spots in a 昀椀rm’s process and philosophy that could generate costs for stakeholders. • Variations in scores between portfolios re昀氀ect the composition and the origins of the underlying risk exposure. • Finally, variation of scores within an institutional investor 昀椀rm indicates where exposure to ESG-related risks accumulates and how much these risks are diversi昀椀ed. Comparison of scores across institutional investor 昀椀rms gives an indication of their relative appetite for risk. To make fund- level scores easier to interpret, 0.0-2.5 is assessed as “Low”, 2.5-5.0 as “Moderate”, 5.0-7.5 as “High”, and 7.5-10.0 as “Very High”. Our solution was designed with the objective of providing a consistent and credible narrative. It is also deliberately neutral and data-driven, rather than analyst-driven, to minimize the possibility of unconscious bias. The role of The objective of our methodology is the evaluation of Risk Exposure Estimates for individual portfolio companies. industry and Relying on company-driven disclosure metrics, as in the case of publicly traded companies, is unfortunately not feasible with geography private companies, as the private markets are more opaque. Although many fund managers have access to proprietary portfolio-company-level data or asset-level information, this data is not necessarily consistent with the rest of the market, conformable, or accessible at scale. Hence the need for models to 昀椀ll in the gaps. We are able to assign a risk proxy to each portfolio company based on two fundamental characteristics: the primary industry in which they operate, because all companies operating in a speci昀椀c industry tend to be exposed to the same risks; and the geographic location of their headquarters, because the regulatory, economic, and physical environment is a decisive factor determining if risk to stakeholders materializes as cost. Our framework draws on a set of 177 publicly available indicators to generate an ESG risk exposure score for each private company in the market. The formulation of our risk exposure model imposes limitations on how it can be used. Our methodology requires each corporate identity to be tagged with an industry. ↗ Back to Contents
Preqin ESG Solutions 30 Hence, at this point, it is only applicable to private equity, private debt, and venture capital. ESG Risk Exposure scores were designed to be compared across portfolio companies, portfolios, and fund manager 昀椀rms. As a result, a level of a score cannot be used to measure absolute risk. The fundamental risk exposure we attribute to portfolio companies is the risk inherent to a given industry. This is then modi昀椀ed according to the country in which their headquarters are located. Hence any two companies operating in the same industry and geography will inevitably have the same ESG risk exposure score. This does not mean we believe two IT companies based in the US are necessarily identically risky from the perspective of ESG. However, for any IT company, the key risks stem from Customer Privacy violation, Data Security breaches or 昀椀erce Competitive Behavior of other market participants. All these risks are more likely to materialize as costs in the US, where a company can be sued in a class action or over an infringement of intellectual property rights. For a full list of data sources for our industry and geography models, please see Appendix C. Identi昀椀cation To identify the sources of material industry risk we leveraged well-established standards, provided by the Sustainability and attribution Accounting Standards Board (SASB). SASB pillars and factors of ESG risk underpin our broad categories (and subcategories) from which ESG risk originates. To measure the magnitude of industry risk we relied on several Key Performance Indicators (KPIs), collected from various publicly available sources. These sources include non-governmental organizations, academic research, market regulators, international agencies, and the o昀케ces of national statistics. Tagging these KPIs to each of the SASB factors enabled us to have a common language covering both public and private market ESG risk assessments. The purpose of our SASB Risk Map functionality is to attribute the sources of industry risk. It provides us with baseline exposure pro昀椀les, which are the 昀椀rst step to building a full picture of ESG risk exposure in private markets. The baseline of risk exposure of any asset is determined by the industry in which it operates. The risk exposure of a fund is determined by the industries in which the underlying assets of that fund operate. Similarly, the risk exposure of a fund manager is based on the exposure of the funds in their portfolio. ↗ Back to Contents
Preqin ESG Solutions 31 To conduct the initial screening, we process the information on all the portfolio companies a fund currently holds – referred to as active deals. Each deal represents an investment in a single industry and each industry has multiple ESG risk factors assessed by the SASB as material. For each fund, we are therefore able to draw up a list of the ESG risks that could materialize across all active deals as a cost to stakeholders. For each of those risks we count the number of deals, where a given risk is material for the underlying industry. The outcome informs us about the composition of ESG-related risks at a deal, fund, or fund manager level. It is presented as a heat-map, available for private companies and infrastructure assets. Industry The starting point for obtaining a Risk Exposure Estimate for each portfolio company is an Industry Risk Score. This is a model proxy of general industry ESG risk to which a given company is exposed. To assign Industry Risk Score to every company we implemented the following steps: 1. First, for each SASB factor that the ESG team assessed as relevant for private markets, we: a. Identi昀椀ed a variety of public sources of industry-level data. All these sources classi昀椀ed industries based on six-digit North American Industry Classi昀椀cation 4 System (NAICS) codes – an established standard in industry taxonomy. These sources included NGOs, academic research, market regulators, international agencies, and the o昀케ces of national statistics. b. Utilized this data to create a single score for each SASB factor, encapsulating risk exposure across all the industries. 2. Then, for each subindustry (if it is unique in the NAICS taxonomy) or industry we: a. Distinguished between those risk factors that are material, according to SASB, and those that are not. b. Converted the scores from (1b) identi昀椀ed for a given industry as material into values between 7.0 and 10.0. ↗ Back to Contents
Preqin ESG Solutions 32 c. Converted the scores from (1b) labelled as not material into values between 2.0 and 7.0. d. Treated any underlying factor where no raw data was available as binary. Material issues were mapped to a 10.0 and non-material issues were mapped to a 2.0. e. Created 昀椀nal risk exposure score at the industry level by aggregating the scores obtained in points (2b-d) for all risk factors 3. To make use of these results within our system, we mapped NAICS codes to Preqin industry classi昀椀cations. 4. Since each company on our platform is tagged to a single primary industry, this mapping enabled us to assign an Industry Risk Score to each company in every portfolio. 4 The North American Industry Classi昀椀cation System (NAICS) is an industry classi昀椀cation taxonomy developed by the national statistical o昀케ces of Canada, Mexico, and the United States. Geography Once we obtained Industry Risk Score Estimates for each portfolio company, we wanted to account for di昀昀erences model in the regulatory, economic, and physical environments in which companies operate. This was the purpose of our auxiliary Geography Risk Score, calculated for countries and dependencies. To obtain a geographic risk proxy for every portfolio company, we executed the following steps: 1. First, for each SASB factor relevant for private markets we: a. Identi昀椀ed a variety of public sources of country-level data. The selected sources included NGOs, academic research, market regulators, international bodies, and the o昀케ces of national statistics. All these sources classi昀椀ed countries and dependencies in a way that could be mapped into three-letter ISO3 codes – a uni昀椀ed taxonomy, promoted by the International Organization for Standardization (ISO). ↗ Back to Contents
Preqin ESG Solutions 33 b. Utilized this data to create a single score for each SASB factor, encapsulating risk exposure across all the countries and dependencies. To assure that our geographic model is conformable, we used the same factors as in the industry risk model. Since no third party provides SASB risk factors at country level, these scores were calculated internally by the ESG team. 2. Then, for each country or dependency (in ISO3 taxonomy), we: a. Converted these scores into numeric values between 0.0 and 10.0. b. Conducted a sequence of aggregations to generate 35 Geography Risk Scores across SASB factor, SASB pillar, E/S/G and overall ESG levels. The highest tier estimate gave us the 昀椀nal risk score at the country level. 3. To make use of these results within our system, we mapped ISO3 codes to Preqin country classi昀椀cations. 4. Every portfolio company on Preqin Pro is classi昀椀ed as having its headquarters in a single country, so we were able to assign a Geography Risk Score to each company with identi昀椀ed headquarters. The composition of our geographic dataset mirrors, to a considerable extent, the inputs used by other public ratings providers that consider ESG risk rigorously. For instance, while there is no codi昀椀ed metric measuring “Human Rights & Community Relations” risk exposure at the country level, academics have amassed an array of data points relevant to its evaluation, including air and water quality, access to nutrition, labor rights and healthcare access, modern slavery, and poverty ratios. Other seemingly viable variables were disregarded due to narrow country coverage, quality issues and cross-correlation with other data. ↗ Back to Contents
Preqin ESG Solutions 34 Modifying industry risk with geography ESG Risk Having obtained 54 Industry Risk Scores and 221 Geography Risk Scores, we combine these two datasets to generate Exposure Risk Exposure Estimates. The measure of risk inherent to a given industry is adjusted by up to ±50% to account for the Estimate regulatory, economic, and physical environment – as de昀椀ned by the location of the company’s headquarters. We calculate it using these formulas: Risk Exposure Estimate= f(Industry Risk Score ×[1+ Geography Risk Modi昀椀er]) Geography Risk Modi昀椀er = Geography Risk Score- 5.0 10.0 Function f(x)=max(0.0,min(x,10.0) ) guarantees that the Risk Exposure Estimate is between 0.0 and 10.0. The Geography Risk Modi昀椀er is typically moderate. For 70% of all the combinations of a country and an industry, the di昀昀erence between the baseline Industry Risk Score and the 昀椀nal Risk Exposure Score is between –1.0 and +1.0. This framework enables us to obtain a proxy of ESG risk exposure for every company in each portfolio. As a result, we can aggregate risk exposure scores associated with individual deals to fund level and fund manager 昀椀rm level. ↗ Back to Contents
Preqin ESG Solutions 35 Data update We apply our methodology every time a deal involving any private company is struck. As a result, we generate new risk process exposure scores at the levels of portfolio company, fund portfolio, and fund manager. This is an ongoing process. Once the deal has been recorded and is visible on Preqin Pro, these scores are updated by the beginning of the following week. The underlying model is scheduled for annual revisions, featuring enhancements and dataset additions. These updates will be announced through client communication. Our selection of data sources is meant to be organic in nature. Once they become available and run through our quality assurance, new studies and data will be incorporated into Preqin’s risk assessment. Our process for updating ESG Risk Exposure Scores data is an action tree: • Issue relevance: in cases where SASB updates a material issue (via addition, removal, or redesign), review of underlying scoring methodology may be required • KPI updates: KPI-driven scores with updated data sources will be updated annually with new raw data, remapped and rescaled. This may require: • Changing industry designations/mapping (e.g. “Home Repair Services” may adjust to an alternate industry taxonomy code) • Filling data gaps (i.e., prior years have data, current year is missing data but can be interpolated, estimated, or chosen for removal) • Replacing datasets entirely (i.e., the source data is no longer updated, valid, or otherwise compromised). • New research: Research refreshes will be conducted each year to con昀椀rm we are using the best available data for each issue • Quality analysis: Data will be reviewed by the data science team at Preqin to identify outliers, issues, or algorithmic bias. • Publication: Prior to publication of a new dataset, communications will be sent to clients with a summary of any relevant changes. ↗ Back to Contents
Preqin ESG Solutions 36 Private Company ESG Risk Metrics Since private markets are opaque, they require a unique investment strategy. If this strategy is to be future-resilient, it needs to account for sustainability-related risks. In particular, it has to be informed by the performance of an asset against the past ESG risks and the areas where these risks build up, as well as mitigate these risks for the future. ESG risks may come from multiple sources. One of the key areas is human capital, with the largest threat being posed by employee turnover and a loss of talent. Another is related to the impact the asset has on the environment. The threat of man-made climate change triggering irreversible feedback loops that would render Earth uninhabitable has prompted decision makers to act. In December 2015, the Paris Agreement5 was signed into law by 193 countries world-wide; many developed economies are currently aiming to entirely reduce their total net emissions by 2050 by implementing a net zero carbon emissions strategy. The unfolding global climate emergency has raised environmental and social awareness and reshaped the regulatory landscape. These rapid changes have incentivized 昀椀rms to re-assess their environmental impact, including their climate-related risk exposures. Many have found they need a realistic, consistent, and robust investment strategy, focused primarily on climate-related risks, to adapt to these new conditions. This strategy needs to account both for the incoming crisis and for the inevitable wave of decarbonization. The process of building an investment strategy for a complete multi-asset portfolio featuring alternatives starts with data. This data can be leveraged to identify the sources of risk by highlighting points of vulnerability. Source and magnitude of risk jointly de昀椀ne risk exposure. These exposures indicate the most material climate risks that investors need to address in their ↗ Back to Contents
Preqin ESG Solutions 37 investment strategies. In the case of the alternatives market, lack of data is still a challenge, leading to risk exposure analysis that is often uncertain and full of gaps. However, analysts say the true limiting factor is bandwidth. To access and use data in a structured way, ESG analysts need to make multiple simplifying assumptions that cannot be veri昀椀ed. As a result, the proposed strategy may be driven not by evidence, but by prior assumptions – and the process of getting there is tedious, labor-intensive and costly. To address the data and bandwidth availability issues limiting sustainable 昀椀nance applications in Alternatives, we provide an out-of-the box solution. It enables you to e昀昀ortlessly integrate performance against risk – across key sustainability factors – into your private market investment strategy and portfolio management. The Private Company ESG Risk Metrics is the only solution available in private markets that provides comprehensive coverage of ESG risk metrics, from individual assets, through portfolios, to fund manager level. This component delivers estimates of carbon emissions, water withdrawal and employee growth and turnover for private companies, all at your 昀椀ngertips. We generate our estimates using a consistent, robust, transparent methodology that was designed to function well with incomplete or missing data. Private Company ESG Risk Metrics overcomes the barriers to entry to the analysis of performance against ESG risk, delivering informative proxies that can guide decisions even when the actual data is absent. 5 The purpose of Paris Agreement is to limit the global temperature increase to 1.5-2.0 °C in comparison to pre-industrial levels. ↗ Back to Contents
Preqin ESG Solutions 38 Highlighted Private Company ESG Risk Metrics use cases for Fund Managers • If you’re managing a thematic fund with a focus on climate change, you can incorporate risk exposure estimates into your screening process, early assessment and pre due diligence of private portfolio companies. • Once a deal is closed, you can benchmark ESG KPIs for that company against similar entities and the broader market. • Our carbon emission data will help you evaluate the impact of diverse decarbonization scenarios on the performance of private companies in your portfolio, thus strengthening your investment thesis. • You can make your investment strategy more future- resilient by using our data on performance against sustainability risks. Private Company ESG Risk Metrics for Investors • Increase visibility of your investment’s climate-risk exposure, even if the information coming directly from the fund you’re invested in is limited. • Track the performance of your investments against key sustainability factors. • Verify the alignment of your climate risk strategy with the Paris Agreement, Net Zero initiatives, and/or international development agenda. Private Company ESG Metrics increases the transparency of an otherwise opaque market. It facilitates communication between fund managers, institutional investors, and service providers by providing a complete picture, so you can enhance your ESG analysis and reporting with the information that matters. Since 昀椀rm-driven disclosure data is not available in private markets, our metrics are estimates. However, Preqin’s ESG Team has devised a robust methodology to 昀椀ll in these gaps and to ensure – in the absence of actual data – that these estimates are well-grounded and informed. Our proxies are ↗ Back to Contents
Preqin ESG Solutions 39 based on a combination of public market ESG data and Preqin’s proprietary alternative markets datasets. Private Company ESG Metrics provide a uni昀椀ed, consistent input to ESG KPIs required in the key frameworks. These include methodologies of Sustainability Accounting Standards Board (SASB), Institutional Limited Partners Association (ILPA), the Data Convergence Project, the Task Force on Climate-related Financial Disclosures (TCFD), the EU Taxonomy, and the Sustainable Finance Disclosure Regulation (SFDR). The company metrics estimates we currently provide are: • Carbon emissions • Scope 1 CO2 emissions (in tons6) • Scope 2 CO2 emissions (in tons) • Scope 1 + Scope 2 CO2 emissions (in tons) • Water withdrawal • In megaliters (ML) • Employee metrics • Net employee growth (% of average yearly headcount) • Employee volatility (% of average yearly headcount) We expect to improve our estimates over time as either more informative datasets, or the actual data, become available. Where portfolio companies or fund managers provide us with proprietary information, we take the disclosed numbers into account. Preqin Private Company ESG estimates are based on third-party data. They were designed to be instrumental in streamlining risk assessment. These estimates provide investors with metrics that enable them to easily identify which ESG factors pose the greatest risk to a private company. Thus, they ultimately inform investment decisions and foster engagement. They help decision makers with stewardship, maintaining engagement, and keeping the conversation between counterparts in an investment active. On top of this, investors can use them as an input for internal ESG scoring frameworks. Our estimates should not be treated as a replacement for veri昀椀ed data, or as a single input for a portfolio allocation model. 6 metric tons. ↗ Back to Contents
Preqin ESG Solutions 40 Carbon Greenhouse gas emissions (GHG) are the main driver of climate change. Sixty-昀椀ve percent of global GHG emissions is attributed7 metrics to carbon dioxide, generated by industrial processes and combustion of fossil fuels. The Task Force for Climate Related Financial Disclosures8 (TCFD) identi昀椀es several transition-related risks associated with carbon emissions. These include energy price shock, a decline in the value of stranded assets, breach of environmental regulations, and reputational risk. Transition- related risks vary depending on scenarios for policy and technology changes. According to the TCFD’s classi昀椀cation, the physical related risks linked to carbon emissions encompass extreme weather, asset destruction, and the aftermath of involuntary migrations. If not properly managed, both transition- related risks and physical related risks will lead to compliance, regulatory and reporting costs. By focusing on carbon emissions data for private companies, you’ll be able to build Net Zero investment strategies that are robust. The calculation of a carbon emissions proxy for each portfolio company starts with four elements: employee count data; a relationship between employee count and carbon emissions; the industry in which the company operates; and the location of its headquarters. On average, carbon emissions grow with the size of a company, as measured by the number of employees9. The employee count data we use for private companies comes from a third- party provider that has run a large-scale web-crawling operation for the past decade. The original sources of these data are government 昀椀lings, online professional pro昀椀les, resumes, and job postings. Our provider leverages these sources to cross- check its data for inaccuracies and inconsistencies, using cutting-edge statistical methods to eliminate sampling biases or reporting delays. We assume a private company’s carbon emissions are proportional to the number of employees – and that this proportion is the same as that extracted from public company data. Although this can be a conservative assumption in some cases, it works well for the majority of the sample. Disclosure, Insight, Action (CDP) provides the public company data on employee numbers and voluntarily Scope 1 and Scope 2 CO2 carbon emissions disclosures. 7 The Intergovernmental Panel on Climate Change (IPCC), 2014; the full report is available here. ↗ Back to Contents
Preqin ESG Solutions 41 The intensity of carbon emissions per employee depends on the industry. In general, manufacturing Glass will generate more carbon dioxide per employee than Corporate Event Management. Therefore, for each industry we obtain a di昀昀erent proportion. This enables us to compute an estimate of carbon emissions for each company active in a given industry based on the number of its employees. The data on industry classi昀椀cation comes from the Preqin Pro proprietary database. It is veri昀椀ed, cross-checked, and curated. The intensity of a portfolio company's carbon emissions varies according to the country in which operates. Its location 10 determines the available energy matrix , energy usage patterns, supply chains, and the regulatory environment. A portfolio company based in Kenya, for example, will on average emit less carbon dioxide than one based in Qatar. To approximate a country of business, we use the location of portfolio company’s headquarters. Next, we use World Bank data to rank all the countries by their carbon emissions per capita. Based on our ranking, we assign to each country a modi昀椀er of up to ±20%. This geographic adjustment is our de昀椀nition of carbon e昀케ciency that we use to re昀椀ne every initial proxy. Our model for calculating estimates is based on the following assumptions: 1. Carbon emissions grows linearly with the number of employees 2. The patterns of emitting carbon per employee are similar for public and private companies within a given industry 3. The population of public 昀椀rms that voluntarily disclose their data to CDP exhibits no selection bias 4. There is a relationship between CO2 emissions e昀케ciencies at the country and at the company level We plan to revisit these assumptions and further re昀椀ne them as the scope and granularity of available data increases. 8 TCFD provides a leading standard for the classi昀椀cation of climate-related risks, used throughout the 昀椀nancial industry. 9 Due to low data coverage, it is not possible to use Market Capitalization as an alternative proxy. 10 The combination of fossil fuels, nuclear power, and renewable sources of energy used to satisfy domestic and industrial energy needs in a geographic region. ↗ Back to Contents
Preqin ESG Solutions 42 The process of generating carbon emissions metrics is outlined 11: below 1. For each company that reports emissions to CDP15: a. Obtain a volume of carbon emissions (Scope 1 and Scope 2) in metric tons b. Obtain employee count c. Calculate the ratio of carbon emissions to number of employees to get the emissions per employee. 2. Map CDP industries to a standard industry classi昀椀cation16 As far as possible, use the lowest level of Industry classi昀椀cation to try to achieve more accuracy. For industries where there are fewer than 20 data points, move up to a broader/ higher-level industry classi昀椀cation until we have at-least 20 companies. Discard all other industry levels where there were fewer than 20 companies. For each industry that remains after 2 a. Collect all the ratios calculated in 1c to form a sample b. Discard the potential outliers below the 5th and above the 95th percentile c. Compute the median to get the median emissions per employee per industry. 3. Rank countries (in ascending order) by CO2 emissions per capita. Map these emissions to geographic adjustment factors such that: a. All the geographic adjustment factors are constrained between 80% and 120% b. Numeric values below 90% are assigned exclusively to the countries in the bottom 5th percentile of the country ranking c. Values above 110% are assigned only to the countries in the top 95th percentile 11 The algorithm is similar for both Scope 1 and Scope 2 emissions estimation. For scope 2, we use the maximum of Market-based and Location-based emissions where both are reported to CDP. ↗ Back to Contents
Preqin ESG Solutions 43 4. For each private company a. Obtain employee count b. To get the company’s emissions estimate, multiply the employee count by: i. The geographic adjustment factor calculated in 4 based on the country that the company’s headquarters are located in. ii. The median emissions per employee per industry as computed in 3c based on the industry the company operates in. What do our emissions estimates mean? 1,000 mT Scope 1 CO2e means that Preqin estimates the asset emitted an equivalent of 1,000 metric tons of CO2 last year. This proxy is calculated based on the number of its employees, its industry, and the country in which its headquarters are located, using public market data and country-level carbon e昀케ciency estimates. ↗ Back to Contents
Preqin ESG Solutions 44 Water metrics An increase in global temperatures causes precipitation 12 changes , leading to erratic rainfall patterns and shifts in agricultural seasons. This can lead to droughts and tsunamis that decrease the amount of available freshwater. Simultaneously, water use has been increasing by about 1% per year since the 1980s. This makes water security a top priority for our adaptation to climate change. The TCFD identi昀椀es physical related risks, associated with water withdrawals, including the risk of drought, scarcity of fresh water, higher incidence of interstate con昀氀icts, and the aftermath of involuntary migrations. Water rationing, water pollution, societal unrest, and breach of environmental regulations are all classi昀椀ed by the TCFD as transition-related risks linked to water withdrawals. If not properly managed, physical related risks and transition-related risks could lead to compliance, regulatory and operational costs. Making the water withdrawal metric a part of your strategy will enable you to brace for times when water is a scarce resource and 昀椀nding alternative water sources is disruptive and costly. In addition, ine昀케cient water management is likely to become a reputational risk. The calculation of a water withdrawal proxy for each portfolio company starts with four elements: employee count data; a relationship between employee count and water withdrawals; knowing the industry in which the company operates; and the location of its headquarters. On average, water withdrawals grow with the size of a company, as measured by the number of employees. Our employee count data for private markets comes from a third-party provider that has run a large-scale web crawling operation for the past decade. The original sources of these data are government 昀椀lings, online professional pro昀椀les, resumes, and job postings. Our provider leverages these sources to cross-check the delivered data for inaccuracies and inconsistencies, using cutting-edge statistical methods to eliminate sampling biases or reporting delays. We approximate the relationship between the size of a company and water withdrawals, assuming the latter are proportional to the number of employees. Although this can be a conservative assumption in some cases, it works well for the majority of the sample. 12 De昀椀ned by the World Bank as the ratio of GDP to water withdrawals. ↗ Back to Contents
Preqin ESG Solutions 45 We assume that the proportion for private companies is the same as that extracted from public company data. Employee count and voluntarily disclosures of water withdrawal for public market companies are provided by Disclosure, Insight, Action (CDP). The intensity of water withdrawals per employee depends on the industry. In general, generating Geothermal energy will require more withdrawn water per employee than developing Accounting/Finance Software. Therefore, for each industry we obtain a di昀昀erent proportion. This enables us to estimate water withdrawals for each company active in a given industry based on the number of its employees. The data on industry classi昀椀cation comes from the Preqin Pro proprietary data base. It is veri昀椀ed, cross-checked, and curated. The magnitude of company’s water withdrawals varies according to the abundance of freshwater sources, quality of infrastructure, and usage patterns in the country in which it operates. For example, a company based in Canada will, on average withdraw more water than one operating in Chad. We treat the location of a company’s headquarters as the county in which it operates. Having used World Bank data to rank all 13 countries by their water productivity , we assign each country a modi昀椀er of up to ±50%, based on our ranking. This geographic adjustment is our de昀椀nition of water e昀케ciency that we use to re昀椀ne every initial proxy. The model we use to calculate our estimates assumes the following: 1. Water withdrawals grow linearly with the number of employees 2. The patterns of withdrawing water per employee are similar for public and private companies within a given industry 3. The population of public 昀椀rms that voluntarily disclose their data to CDP exhibits no selection bias 4. There is a relationship between water e昀케ciencies at the country and company levels We plan to revisit these assumptions and further re昀椀ne them as the scope and granularity of available data increases. ↗ Back to Contents
Preqin ESG Solutions 46 The process of generating our water withdrawal metrics is outlined below: 1. For each public company covered by CDP: a. Obtain a volume of water withdrawals in megaliters b. Obtain employee count c. Calculate the ratio of water withdrawals to the number of employees to get water withdrawal per employee. 2. Map CDP industries to a standard industry classi昀椀cation16As far as possible, use the lowest level of Industry classi昀椀cation to try to achieve more accuracy. For industries where there are fewer than 20 data points, move up to a broader/ higher-level industry classi昀椀cation until we have at least 20 companies. Discard all other industry levels where there were fewer than 20 companies. 3. For each industry that remains after 2: a. Collect all the ratios calculated in 1c to form a sample b. Discard the potential outliers below the 5th and above the 95th percentile c. Calculate the median ratio to get the median water withdrawal per employee per industry 4. Rank countries (in ascending order) by water productivity. Map these withdrawals to geographic adjustment factor such that: a. All geographic adjustment factors are constrained between 50% and 150% b. Numeric values below 75% are assigned exclusively to the countries ranking in the bottom 5th percentile. c. Values above 125% are assigned only to the countries in the top 95th percentile. 5. For each private company: a. Obtain employee count b. To get the company’s water withdrawal estimate, multiply the employee count by: i. The geographic adjustment factor calculated in 4 based on the country that the company’s headquarters are located in. ↗ Back to Contents
Preqin ESG Solutions 47 ii. The median water withdrawal per employee per industry as computed in 3c .based on the industry the company operates in. What do our water withdrawal estimates mean? 100 Ml water withdrawn means Preqin estimates the asset withdrew last year 100 megaliters of water last year. This proxy is based on the number of employees a company has, its industry, and the country in which its headquarters are located, drawing on public market data and country-level water e昀케ciency estimates. Employee A creative, motivated, and highly trained workforce is often its most important resource. Companies compete for the most metrics capable candidates, to secure the highest competency levels in technology, leadership, or interpersonal communication. The risk of losing top talent materializes in several ways. A company might lose its competitive edge, fail to achieve its targets, or no longer be able to conduct its core operations. It will also face a substantial cost (both in terms of time and money) of hiring a replacement – and any company unable to secure a dedicated workforce will struggle to expand and grow. Preqin ESG employee metrics captures information about whether a potential portfolio company is growing, gaining or losing talent, o昀昀shoring, outsourcing, or expanding into new markets. It will indicate looming problems with skills or cultural mismatches before your decision about an acquisition or buyout becomes 昀椀nal. It may also deliver an early warning signal, allowing you to adjust and implement your strategy before the performance of your investments is adversely a昀昀ected. We currently provide two employee metrics: • Employee net growth approximates the net change in the number of employees within a given year • Employee volatility estimates the gross change in the number of employees within a given year. It approximates employee turnover rates. Both metrics are relative to the size of a company, so values are comparable across an entire portfolio. ↗ Back to Contents
Preqin ESG Solutions 48 Our model relies on monthly employee in昀氀ow and out昀氀ow data for private market companies. This data comes from a third- party provider that has run a large-scale web-crawling operation for the past decade. The original sources of these data are government 昀椀lings, online professional pro昀椀les, resumes, and job postings. Our provider leverages these sources to cross- check the delivered data for inaccuracies and inconsistencies, using cutting-edge statistical methods to eliminate sampling biases or reporting delays. We calculate both metrics for each portfolio company listed on Preqin Pro for which our provider has data. The model calculating our estimates is based on the following assumptions: 1. The provider’s employee in昀氀ow and out昀氀ow count data is reliable. 2. The dynamics of in昀氀ows and out昀氀ows does not fundamentally change between the periods when the data is available and when it is not. Therefore, gaps in the provider’s estimates can be 昀椀lled in based on the remaining data. 3. If less than a full year of data is available, this incomplete data is representative of the entire year. To generate proxies of in昀氀ows and out昀氀ows that are, on average, correct, it is therefore enough to express the estimates based on this partial data in yearly terms. To calculate all the employee metrics for a portfolio company, denoted by index j, we use the three equations below. All these formulas are computed using up to 12 monthly observations preceding (and including) the most recent available data point. Indexes i_min and i_max represent, respectively, the 昀椀rst and the last month of the data, obtained for company j in a reference year. To obtain numeric values of both metrics, we 昀椀rst need to determine the Average Employment Count for company j in this year. We use this approximate headcount to normalize our estimates of Employee Net Growth and Employee Volatility. ↗ Back to Contents
Preqin ESG Solutions 49 To calculate the yearly Average Employment Count (AEC) we utilize the formula To calculate net employee growth, we 昀椀rst sum all the available monthly net employee in昀氀ows and convert the resulting value to its yearly equivalent. Next, we normalize it, using AEC To 昀椀nd Employee Volatility for company j, we 昀椀rst use the available monthly data to approximate churn and convert the resulting value into its yearly equivalent. Next, we normalize it, using AEC The advantage of a normalization using the average employment count over the entire year, in contrast to the employment count taken at the beginning of this year, is that we obtain a denominator that is less volatile and robust to measurement errors. What do our employee metrics mean? 12% Net employee growth means that Preqin estimates that a company’s employees grew by 12% within a year of the most recent available data, based on our provider’s employee in昀氀ow and out昀氀ow count data. This value accounts for new hires as well as employees who left or were let go. 23% Employee volatility means that Preqin estimates the proxy of employee turnover amounted to 23% of the total headcount within a year of the most recent available data, based on our provider’s employee in昀氀ow and out昀氀ow count data. This value accounts for new hires as well as employees who left or were let go. ↗ Back to Contents
Preqin ESG Solutions 50 Data update Private Company ESG Risk Metrics relies on third-party, public, and public markets disclosure data. Our process for updating process these is an action tree: • Every time a new private company is featured on Preqin Pro, with a known employee count and a speci昀椀ed headquarters location, it is instantly assigned estimates of carbon emissions, water withdrawals, net employee growth and net employee volatility. • The employee count data is refreshed every month, as soon as it becomes available. Estimates of company metrics are updated accordingly. • Every year we refresh the public data sourced from the World Bank and the voluntary disclosures data provided by CDP. The former is necessary to evaluate country adjustments for carbon and water e昀케ciencies. The public market data enables us to re-evaluate the relationship between observable public companies and our metrics. After each update we re-train our models, then update all estimates. 13 Economic term “positive externality” describes the situation in which the consumption or production of a good or service causes a bene昀椀t to a third party (such as society or environment) not directly involved in the market transaction. 14 Delivered by Global Impact Investing Network (GIIN). 15 Natural Language Processing is the application of computational techniques to the analysis and synthesis of natural language and speech. ↗ Back to Contents
Preqin ESG Solutions 51 Module III: Impact Potential Preqin’s Impact Potential module streamlines initial evaluation of the potential future impact of private companies and infrastructure assets listed on Preqin Pro. Pro昀椀t maximization for the accepted level of risk has traditionally been viewed as the key end goal of a 昀椀nancial investment. However, the rise of sustainability awareness among investors has created a need for funds that pursue sustainable objectives complementary to 昀椀nancial returns. To ful昀椀l their mandate, impact funds seek out and foster investments with positive societal or environmental impact. Such an investment generates multi-faceted, lasting bene昀椀ts that extend beyond growth in the portfolio company’s value. These bene昀椀ts could materialize as a technology to clean the oceans, or a solution that delivers a昀昀ordable internet to the most disadvantaged. A common thread in impact investing is the desire to precipitate a real-world change. Impact investors aim to bring about the sustainable, equitable future that is not yet here. ↗ Back to Contents
Preqin ESG Solutions 52 The challenge of measuring impact The main problem faced by impact funds is measuring impact in a consistent and meaningful way. Since there are huge di昀昀erences in how portfolio companies seek to improve society 13 are so varied that or the environment. Positive externalities the data points instrumental in capturing the in昀氀uence of one company will not be relevant for others. For example, reducing prison inmate populations and providing sanitation to under- served communities have radically diverse social consequences, the measurement of which require markedly di昀昀erent metrics. The relevant impact measures are likely non-conformable and cannot simply be aggregated for the entire impact portfolio. The evaluation of impact often requires data tracked across many years and a methodology that is tailor-made to 昀椀t a given business case. In practice, such a study could be conducted in its entirety only at the end of an investment life cycle, when the extent of the e昀昀ected impact of a given enterprise can 昀椀nally be observed. However, what funds really need is a way to identify early signals of a potential portfolio company’s impact that could materialize in the future, should they greenlight an investment. At this stage, detailed impact metrics computed internally for a given portfolio company either do not exist or are not accessible to investors. While UN Sustainable Development Goals (UN SDGs) framework 14 outlines impact goals, and IRIS+ methodology provides how-to guidance for the measurement of impact over a standardized set of core metrics, they do not solve the two outlined problems. This, inherently, is the impact challenge – how do you measure a future impact over a broad spectrum of speci昀椀c, non-conformable factors? ↗ Back to Contents
Preqin ESG Solutions 53 Preqin’s Impact Potential module does not attempt to measure direct impact. Its purpose, instead, is to provide a measure of future impact potential – by leveraging the information disclosed by impact fund managers, Preqin’s granular industry 15 taxonomy, and a conservative Natural Language Processing (NLP) impact estimation model. Our objective is to answer a single question: how likely is it that a particular asset could generate positive externalities/impact? We de昀椀ne positive impact as generate a social and/or environmental bene昀椀t alongside 昀椀nancial returns. Highlighted Impact Potential for Fund Managers use cases • Build target lists and streamline pre due diligence by expediting the screening process. • Identify trending sectors and regions, thus limiting your search costs for prospective investments and alerting you to enter these markets at an earlier stage. • Gauge the potential positive impact of an investment before it fully materializes. Impact Potential for Investors • Assess the impact of prior investments held by the fund managers to which you are considering committing capital. • Use the insights into how they understand impact to deepen your research in preparation for annual rounds of portfolio monitoring. Impact Potential for Service Providers • Use market intelligence regarding trends in the industry to improve the service you o昀昀er your investment team clients. ↗ Back to Contents
Preqin ESG Solutions 54 Identi昀椀cation and classi昀椀cation of future impact For each private company and infrastructure asset listed on the Preqin Pro platform we provide a likelihood level estimate that it will generate a social and/or environmental bene昀椀t. These individual likelihood levels are then aggregated up to the fund level, based on the funds’ underlying assets, and to the fund manager level, based on their funds. The Impact Potential evaluation assigns one of four likelihood levels – “Very Likely”, “Likely”, “Possible”, or “Unlikely/Unknown” – to each private company or infrastructure asset featured on our platform. Each level describes the likelihood that a particular asset already does or will in future produce a positive externality. Our estimates are currently limited to private portfolio companies and infrastructure assets. They are not available for real estate assets. The process of evaluating these likelihood levels is outlined on the next page. ↗ Back to Contents
Preqin ESG Solutions 55 *Impact NLP Model Does the company description contain works/terms similar to those in any of the UN SDGs descriptions? ↗ Back to Contents
Preqin ESG Solutions 56 Step 1: If a private company or an infrastructure asset in our database is in a portfolio of an impact fund, it is considered “Very Likely” Identify to produce a positive impact. assets already Preqin uses fund managers’ public and private disclosures to in known identify the funds labeled as impact funds. Their investment philosophy is to generate positive and measurable social and impact funds environmental impact alongside a 昀椀nancial return. We use this tag to identify the assets to which these impact funds have allocated capital. Our working assumption is that the impact potential of the underlying assets has been evaluated by the fund manager’s investment team. If an asset in our database has been tagged to an impact fund, we do not identify a particular data point in support of that impact, nor do we assess the scale of the impact. We tag it as having been identi昀椀ed as an impact investment by an impact fund manager. Step 2: If a private company or an infrastructure asset is operating in an Identify impact sector, it is considered “Very Likely” to generate impact. Preqin leverages its granular taxonomy to identify industry assets in verticals, secondary industries and primary industries that are known impact inherently aligned with SDG goals and irrefutably entail impact. These sectors tend to target new or under-served markets. industries The full list of sectors we identi昀椀ed as associated with having impact, which includes renewable energy, micro-昀椀nance, education, and health. ↗ Back to Contents
Preqin ESG Solutions 57 Step 3: If a private company or infrastructure asset is not identi昀椀ed as a “Very Likely” source of impact in the 昀椀rst two steps, its impact Leverage potential is estimated through our NLP model. natural Preqin leverages its database of company and infrastructure language asset descriptions to form a view of a company’s activities that goes beyond raw industry classi昀椀cation. These asset processing descriptions tell us about a company’s main area of operations, its supply chains and how it conducts business. They also (NLP) to reveal information about shareholders’ values, aspirations, and objectives. Excepting direct experience as a client, contractor identify or employee, these asset descriptions are the best source of information about the nature and characteristics of a given potential enterprise. impact Our method for assigning likelihood levels of impact potential assets to assets neither operating in known impact industries nor featuring in impact funds is outlined below: a. Using the corpus originating from the UN SDG’s website and o昀케cial documentation we generate a list of frequently used keywords. This list is then curated to remove words unrelated to impact (e.g. “company”), and add words that are missing (such as “sustainability”). The objective is to create an initial list of keywords associated with impact. b. We then stem each keyword to account for di昀昀erent grammatical forms and variants of each word (so “empowerment” would be replaced with “empower*” – the asterisk representing any sequence of characters). c. We then rate each stemmed keyword, based on its frequency throughout the SDGs objectives, normalizing these scores to percentages between zero and hundred. d. For each private company on Preqin Pro: i. We search its description for words matching the keywords from point (b) ii. We then add the scores (from point c) of each stemmed keyword that appears in the description. Each stemmed keyword is counted only once, irrespective of the number of repetitions ↗ Back to Contents
Preqin ESG Solutions 58 iii. The sum in (dii) is our similarity score for a given private company. A company with no matching stemmed keywords in its description receives no score. e. We then sort all the private companies (in descending order, including the ones already tagged as a “Very Likely” source of impact) according to their similarity with SDG objectives. f. For each private company on our platform without a likelihood level rating: i. If it lies in a top quartile of similarity scores with SDG corpus, it is assessed as a “Likely” source of impact potential ii. If it lies in the second quartile its impact potential is assessed as “Possible” iii. Otherwise, it is tagged as “Unlikely/Unknown”. g. We then repeat points a to c with EU Taxonomy as a corpus, using the outputs to repeat points (d-f) for each infrastructure asset. Note that beyond Step 2 no asset is ever tagged as a “Very Likely” source of impact, no matter how corpus-aligned its description is. This is an intentionally conservative choice, to mitigate potential greenwashing in the asset’s description. It also enables our clients to distinguish our estimates from the data. We will illustrate this approach using a description of a company that is neither held by an impact fund, nor it is operating in an impact-related industry. While its impact potential cannot be assessed in the 昀椀rst two steps of our procedure, the company’s description contains multiple SDG keywords. ↗ Back to Contents
Preqin ESG Solutions 59 These keywords (highlighted below) can be accounted for by our NLP model: “... a British luxury sustainable fashion brand. The company started with handbags made from upcycled bottle tops in Kenya lined with leather o昀昀cuts. Through a collaboration the company got recognized internationally, supporting artisans and funding health education for young people in Africa. The company opened the world’s 昀椀rst zero-waste store. The company conducts atelier and training programs in Brazil and Nepal and continues to source the 昀椀nest sustainable and up-cycled materials in challenged parts of the world. The company supports health, education and skills training projects through its foundation, founded in 2002. The company o昀昀ers a wide variety of accessories to customers like cross- body bags, shoulder bags, tote bags, backpacks, clutches and mini bags, phone purses, belts, bag straps, 昀氀ower clips, masks, scarves, bracelets etc. These accessories are categorized under di昀昀erent types of collection names like classic collection, new naturals, peace collection and edition collection. The company also o昀昀ers various types of discounts on its products, such as summer sales. The company’s creations are solely made from sustainably sourced materials like zero-deforestation leather, discarded aluminum ring pulls and up-cycled plastic yarn. The zero-deforestation leather is so called because it is sourced from sustainable farms and certi昀椀ed tanneries that ensure that their operations have zero deforestation impact on the rainforests. Even the packaging of the products is plastic free and made out of recycled cardboard material.” Adding together the scores for each stemmed keyword, we obtained a measure of this company’s alignment with SDG objectives. This similarity score allows us to rank the company against its peers and assign a likelihood level of impact potential. We use the same approach to assess each private company and infrastructure asset on Preqin Pro. As of November 2022, 5.3% of the 181,000+ private companies on Preqin Pro were deemed a “Likely” source of impact, with 9.5% a “Possible” source. Similarly, 2.3% of infrastructure assets on Preqin Pro – which number nearly 32,000 – were tagged as a “Likely” source of impact, with 10% a “Possible” source. These proportions will likely change as more assets are featured in our database. They re昀氀ect our preference to make an actionable signal rare, thus reducing the screening costs. ↗ Back to Contents
Preqin ESG Solutions 60 Data update process Our impact potential model relies on data from three inputs: investment fund tags, industry tags and our NLP model. The process for updating Impact Potential data runs as follows: • Every time a new fund tagged as “impact” is featured on Preqin Pro, each of its portfolio companies is immediately assessed as “Very Likely” to generate a social and/or environmental bene昀椀t. • Similarly, every time a deal made by an impact fund is registered on our platform, the private company or infrastructure asset it has invested in is tagged as “Very Likely” to generate impact. • Whether a given industry is associated with delivering impact is a subject of ongoing research. When the Preqin ESG Team adds to the list of impact industries, the assets in those industries will be assessed as a “Very Likely” source of impact potential. • Every time a new asset is featured on Preqin Pro that is neither in the portfolio of an impact fund nor is operating in an impact industry, it will be assigned a likelihood level after the next re-run of our proprietary NLP model. These are scheduled to take place every month. ↗ Back to Contents
Preqin ESG Solutions 61 List of abbreviations and ESG terms CDP Disclosure, Insight, Action (formerly known as Carbon Disclosure Project): a provider of voluntarily disclosure data for public market companies double A sustainability matter is said to be “double material” if it is material materiality from either the impact perspective, or the 昀椀nancial perspective, or both perspectives. This concept which provides criteria for the determination of whether it should be included in a sustainability report. energy matrix The combination of fossil fuels, nuclear power, and renewable sources of energy used to satisfy domestic and industrial energy needs in a geographic region ESG Environmental, Social and Governance factors in measuring sustainability and the ethical impact of an investment in a business or company GHGs Greenhouse Gases GIIN Global Impact Investing Network GPs General Partners (fund managers) ILPA Institutional Limited Partners Association IPCC The Intergovernmental Panel on Climate Change IRIS+ A methodology providing how-to-guidance for the measurement of impact over a standardized set of core metrics, developed by GIIN ISO International Organization for Standardization KPIs Key Performance Indicators LPs Limited Partners (institutional investors) Minority- The 昀椀rm website tells us they are a minority-owned 昀椀rm, or the GP tells us owned 昀椀rm via direct update. In all cases, we should never use photographs to identify the ethnicity of a contact. NAICS North American Industry Classi昀椀cation System ↗ Back to Contents
Preqin ESG Solutions 62 Net Zero The Net Zero strategy aims to achieve a balance between the amount of carbon emitted into the atmosphere and the carbon removed from it NGOs Non-governmental Organizations NLP Natural language processing; the application of computational techniques to the analysis and synthesis of natural language and speech Paris An international agreement, signed into law in December 2015 by 193 countries Agreement worldwide. Its purpose is to limit the global temperature increase to 1.5-2.0 °C in comparison to pre-industrial levels PASIs Principal Adverse Sustainability Impacts, related to SFDR’s Article 4 positive A situation in which the consumption or production of a good or service externality causes a bene昀椀t to a third party (such as society or the environment) not directly involved in the market transaction Preqin Pro Our proprietary platform; the leading source of ESG data for private markets SASB Sustainability Accounting Standards Board Scope 1 direct carbon emissions, coming from organization’s owned or controlled emissions sources Scope 2 indirect carbon emissions, coming from organization’s purchased sources emissions Scope 3 all other indirect carbon emissions generated within an organization’s entire emissions value chain SDGs United Nations’ Sustainable Development Goals SFDR European Union’s Sustainable Finance Disclosure Regulation TCFD Task Force on Climate Related Financial Disclosures UNPRI United Nations Principles for Responsible Investing WMO World Meteorological Organization Women- The majority of the top-level position(s) held are held by women (50% or owned 昀椀rm more) e.g. CEO, Managing Partners, Managing Director, Partner. Usually, the 昀椀rm website says they are a women owned 昀椀rm, or the 昀椀rm tells us via direct update. In all cases, we should never use photographs to identify the gender of a contact. ↗ Back to Contents
Preqin ESG Solutions 63 Appendix A ESG Transparency KPIs Indicator Key Question Indicator Governance ESG Pillar Theme Framework Applicability Type _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ The ownership structure Does the GP disclose GP Firm Governance Corporate Ratings of the GP who owns the 昀椀rm? Governance Providers Registered investment Is the 昀椀rm registered GP Firm Governance Corporate ILPA advisor or a registered as an investment Governance broker dealer status advisor (in any country)? General partner 昀椀rm-level Does the 昀椀rm GP Firm Governance Corporate Ratings governing, leadership, or disclose the board Governance Providers executive bodies, including members or C-level the board of directors sta昀昀? Female representation on Does the 昀椀rm GP Firm Governance Corporate Ratings the board of directors disclose that there Governance Providers are females are on the board of directors? Any mention of ESG Does the 昀椀rm GP Firm Governance Corporate SASB consideration in mention any Governance operations consideration of ESG? A code of conduct policy Does the 昀椀rm have a GP; LP Firm Governance Management ILPA for employees code of conduct? of the Legal & Regulatory Environment An insider trading policy Does the 昀椀rm have GP Firm Governance Management Ratings an insider trading of the Legal Providers policy? & Regulatory Environment An anti-money laundering Does the 昀椀rm have GP Firm Governance Management Ratings and/or "know your client" an anti-money of the Legal Providers (AML KYC) policy laundering/know & Regulatory your client (AML KYC) Environment policy? ↗ Back to Contents
Preqin ESG Solutions 64 Indicator Key Question Indicator Governance ESG Pillar Theme Framework Applicability Type _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ A whistle-blower or Does the 昀椀rm have a GP Firm Governance Management Ratings anonymous incident whistle-blower policy of the Legal Providers reporting process or procedure? & Regulatory Environment A modern slavery or Does the 昀椀rm have GP Firm Social Labor Ratings human rights policy a modern slavery Practices Providers policy? Adherence to any ISO Does the 昀椀rm GP Firm Social Data Ratings standards mention that it Security Providers adheres to any ISO standards? General partner 昀椀rm-level Does the 昀椀rm have a GP Firm Social Data Ratings privacy policy privacy policy? Security Providers A formal diversity policy or Does the 昀椀rm have GP Firm Social Employee ILPA initiative a diversity and Engagement, inclusion policy? Diversity & Inclusion Discloses a public Does the 昀椀rm publish GP; LP Firm Governance Corporate Ratings sustainability report a sustainability Governance Providers report? Statements, policies, Does the 昀椀rm GP; LP Firm Environmental Corporate TCFD or initiatives related to disclose any policy Governance climate change related to climate change, carbon or emissions? General partner 昀椀rm-level Does the 昀椀rm GP Firm Environmental Corporate Ratings carbon or GHG emissions disclose their carbon Governance Providers or greenhouse gas (GHG) emmisions? Any mention of ESG Does the GP; LP Portfolio Governance Corporate SASB consideration in investing 昀椀rm mention Governance consideration of ESG factors in its investment process? An investment policy that Does the 昀椀rm have GP; LP Portfolio Governance Corporate UNPRI includes ESG issues an ESG policy? Governance A policy detailing Does the 昀椀rm GP; LP Asset Governance Post- Ratings engagement processes disclose an Investment Providers with portfolio companies engagement policy Process with portfolio companies? ↗ Back to Contents
Preqin ESG Solutions 65 Indicator Key Question Indicator Governance ESG Pillar Theme Framework Applicability Type _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ An engagement process or If the 昀椀rm has an GP; LP Asset Governance Post- Ratings considerations speci昀椀cally engagement policy Investment Providers focused on ESG issues does this policy Process with portfolio companies include ESG issues? The number of companies Does the 昀椀rm GP Asset Governance Post- Ratings in the portfolio with disclose how many Investment Providers whom engagements companies they Process were conducted on ESG have engaged with policies or issues regarding ESG policies/issues? ESG educational programs Does the 昀椀rm GP Asset Social Post- Ratings designed and run for provide education to investment Providers portfolio companies portfolio companies Process about ESG issues? A code of conduct policy Does the 昀椀rm require GP Asset Governance Corporate ILPA for portfolio companies portfolio companies Governance to follow a code of conduct? A policy specifying how Does the 昀椀rm GP Portfolio Governance Corporate UNPRI ESG factors are used consider ESG factors Governance before investing in before making an a company investment? Evidence of environmental Does the 昀椀rm obtain GP Asset Environmental Post- ILPA impact studies conducted environmental Investment on portfolio companies or impact studies Process properties for each of its portfolio company and property investments? A policy specifying how Does the 昀椀rm GP Portfolio Governance Corporate UNPRI ESG factors are used after consider ESG factors Governance investing in a company or after making an in company exits investment? Tracking of GHG emissions Does the 昀椀rm track GP; LP Asset Environmental Post- Ratings at portfolio companies the emissions of Investment Providers portfolio companies/ Process assets? ESG due diligence Does the 昀椀rm GP; LP Portfolio Governance Corporate UNPRI reporting lines disclose who is Governance responsible for ESG at the 昀椀rm at executive level? Dedicated ESG Does the 昀椀rm have a GP; LP Portfolio Governance Corporate UNPRI investment sta昀昀 dedicated ESG team? Governance ↗ Back to Contents
Preqin ESG Solutions 66 Indicator Key Question Indicator Governance ESG Pillar Theme Framework Applicability Type _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Reporting or monitoring Does the 昀椀rm GP Asset Governance Post- Ratings portfolio companies using monitor ESG Investment Providers ESG KPIs performance in their portfolio companies? Total AUM disclosed as What is the 昀椀rm's GP; LP Portfolio Governance Pre- UNPRI subject to ESG criteria or AUM that is subject Investment policies to ESG criteria? Process A list of investors by Does the 昀椀rm GP Portfolio Governance Business UNPRI type (i.e. "family o昀케ce") mention the types of Model investors they work Resilience with? Total assets under What is the 昀椀rm's GP Portfolio Social Post- UNPRI management in ESG funds AUM for ESG speci昀椀c Investment funds? Process Fund o昀昀erings sold as Does the 昀椀rm o昀昀er GP Portfolio Governance Pre- UNPRI "ESG" or "ESG-themed" ESG-themed funds? Investment funds Process Total assets under Does the 昀椀rm GP Portfolio Social Post- UNPRI management in impact or disclose their AUM Investment SDG-related companies targeting impact Process or SDG-related investments? Fund o昀昀erings sold as Does the 昀椀rm o昀昀er GP Portfolio Governance Pre- UNPRI "Impact" or "SDG" funds impact funds? Investment Process ↗ Back to Contents
Preqin ESG Solutions 67 ESG Transparency KPIs Disclosure Guidance Indicator Guidance _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ The ownership structure of the GP Ownership structures speci昀椀cally refer to whether the General Partner is publicly listed (if they have an investor relations section on their website or if they are listed on any global exchange and have a stock ticker, for instance) or if they list the owner(s) of the company. Registered investment advisor or a This speci昀椀cally refers to whether the 昀椀rm is regulated by a securities regulator, registered broker dealer status either as a registered investment advisor, broker, or other regulated entity that can legally give investment advice. General partner 昀椀rm-level governing, This is meant to simply capture the disclosure of any executives or governing leadership, or executive bodies, bodies at the 昀椀rm level. This may include disclosure of the board of directors, including the board of directors Chief Executive O昀케cer or executive team, or any other 昀椀rm leadership. Female representation on the Disclosure of the gender of members of a 昀椀rm’s board of directors or the board of directors breakdown of gender on the board by percentage which indicate the inclusion of at least one female board member. The amount of female representation on the board is immaterial in this instance, as we are assessing transparency and not 昀椀rm performance. This may also be disclosed through board member photos, clearly indicating the existence of a female board member. Any mention of ESG Mention of ESG on a 昀椀rm’s website, policies, reports, or other collateral. This consideration in operations indicator is considered disclosed if any material suggests that the company is using ESG in some way, either in their portfolio management or in their own business operations, such as management of diversity or carbon emissions. This does not include philanthropy or CSR initiatives, but must speci昀椀cally mention information about environmental risk management, labor risk management, or governance issues. A code of conduct policy for Disclosure of a code of conduct policy, which may take the form of an ethics employees code, bribery code, or other code of conduct that employees must abide by. An insider trading policy This is marked as disclosed if the 昀椀rm speci昀椀cally mentions the existence of an insider trading policy or discloses the policy itself. This policy or mention of its existence may be included within a disclosed code of conduct policy, for example. An antimoney laundering and/or This is marked as disclosed if the 昀椀rm speci昀椀cally mentions the existence of an "know your client" (AML KYC) policy antimoney laundering, "know your client" (KYC) policy or discloses the policy itself. A whistle-blower or anonymous This is marked as disclosed if the 昀椀rm speci昀椀cally mentions the existence of a incident reporting process whistle-blower policy or discloses the policy itself. This may include a whistle- blower or anonymous hotline for reporting breaches in conduct, or another system for reporting internal issues anonymously. A modern slavery or human rights This is marked as disclosed if the 昀椀rm speci昀椀cally mentions the existence of a policy modern slavery, human tra昀케cking, or human rights policy or discloses the policy itself. This may also include policies applicable to parent or subsidiary companies. Adherence to any ISO standards ISO standards are speci昀椀c standards set by the International Organization for Standardization. A full list of standards is available here. The 昀椀rm may adhere to any ISO standard for this indicator to be considered disclosed. General partner 昀椀rm-level This is marked as disclosed if the 昀椀rm speci昀椀cally mentions the existence of a privacy policy privacy policy or discloses the policy itself, including those of parent company. This will also be considered disclosed if a 昀椀rm adheres to ISO standards or JIS Q standards related to privacy, data protection or data management. ↗ Back to Contents
Preqin ESG Solutions 68 Indicator Guidance _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ A formal diversity policy or initiative This is marked as disclosed if the 昀椀rm speci昀椀cally mentions the existence of a diversity policy or discloses the policy itself. This can include a formal policy, an actual initiative or target for inclusion in hiring, a process to hire more diverse candidates, or adoption of a third-party policy on diversity. Discloses a public Sustainability Report This is marked as disclosed if the 昀椀rm has released a sustainability, corporate responsibility, CSR, ESG, socially responsible, impact, or other ESG/impact-related report within in the past two years. This may include UNPRI Public Signatory Reports. Statements, policies, or initiatives This is marked as disclosed if the 昀椀rm discloses any statements, policies, or related to climate change initiatives related to climate change, carbon, or emissions. This is related to the company itself, which may include statements regarding the risks of climate change, announced initiatives to measure or manage climate risk as part of a 昀椀rm’s business model or investment strategy, or disclosure of a carbon or climate change-related policy. General partner 昀椀rm-level carbon This is marked as disclosed if the 昀椀rm discloses their Scope 1, Scope 2 and/or or GHG emissions Scope 3 GHG emissions. This must include numerical 昀椀gures, generally recorded in tons. Additionally, this indicator will also be considered disclosed if a 昀椀rm adheres to ISO14064, as this is the international standard for disclosure. Any mention of ESG Mention of ESG consideration in a 昀椀rm’s investment process. This may include the consideration in investing disclosure of an ESG policy or any mention of ESG as a factor, consideration, or potential risk or opportunity in investing. An investment policy that Any disclosed investment policy that mentions the consideration of ESG in includes ESG issues investing. This speci昀椀cally refers to an investment policy that extends beyond ESG in 昀椀rm operations. A policy detailing engagement Disclosure of an engagement policy that details a general engagement process processes with portfolio companies with portfolio companies on any topic or issue. This must include evidence of a process or issue that exempli昀椀es how engagement happens. An engagement process or Disclosure of an engagement policy that details a engagement process with considerations speci昀椀cally focused on portfolio companies on ESG speci昀椀c issues. This must include evidence of a ESG issues with portfolio companies process or issue that exempli昀椀es how engagement happens. ESG issues may include any environmental issues (waste, water, energy, pollution, carbon, regulatory 昀椀nes for environmental damage, etc), social issues (employees and employee management, social protests, religious issues, etc), or governance issues (management team composition, leadership structure, business ethics or codes of conduct, bribery, corruption, etc). The number of companies in the Disclosure of the number of companies that were reviewed for ESG issues or portfolio with whom engagements against an ESG policy either before or after investment. This does not necessarily were conducted on ESG policies need to include what they were reviewed for as long as it speci昀椀es, even or issues generically, "ESG issues" or "ESG" as the basis for review. ESG educational programs designed The existence of any formal educational programs designed for portfolio and run for portfolio companies companies that address ESG issues. This may include portfolio company trainings o昀昀ered by the GP on topics such as workforce management, environmental law, corporate structures, stakeholders, diversity and inclusion, or anything else related to ESG. A code of conduct policy for Disclosure of a code of conduct explicitly stated as applicable to portfolio portfolio companies companies. This may take the form of an ethics code, bribery code, or other code of conduct that employees must abide by. A policy specifying how ESG factors are Disclosure of a policy speci昀椀c to pre-investment due diligence that includes the used before investing in a company consideration of ESG factors before making an investment, the application of an exclusionary policy, or the consideration of environmental or social impacts of portfolio companies before investing. ↗ Back to Contents
Preqin ESG Solutions 69 Indicator Guidance _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Evidence of environmental impact This is marked as disclosed if the 昀椀rm mentions that they conduct environmental studies conducted on portfolio impact studies before investing in portfolio companies, while holding and companies or properties engaging with portfolio companies, or as part of typical portfolio company exits. Environmental impact studies may include pollution studies, emissions studies, or any other study that is related to the environment as part of investing. This must speci昀椀cally be a study conducted on one or more of the companies in which they invest, going beyond the mere consideration of environmental impacts of their portfolio companies. A policy specifying how ESG factors are Disclosure of a policy speci昀椀c to post-investment processes that includes ESG used after investing in a company or in engagements, tracking ESG factors, and/or how ESG is considered when exiting an company exits investment. Tracking of GHG emissions at This is marked as disclosed if the 昀椀rm mentions that they track Scope 1, Scope portfolio companies 2 and/or Scope 3 GHG emissions of their portfolio companies. This may include numerical 昀椀gures or any mention of tracking carbon or emissions. ESG due diligence reporting lines Disclosure of who is ultimately responsible for enforcing ESG policy, ESG reviews, ESG oversight, or other ESG procedures in the investment process. This includes designated groups, parties, or people inside the company responsible for overseeing ESG. This will also be considered disclosed if an executive team is also an ESG team. Otherwise, the reporting lines and ultimate ESG authority must be disclosed. Dedicated ESG investment sta昀昀 Disclosure of any sta昀昀 members speci昀椀cally dedicated to implementing ESG policies, strategies, and procedures in the investment process. This may be a dedicated business unit, team, or individual. Reporting or monitoring portfolio This is marked as disclosed if the 昀椀rm mentions that they monitor ESG companies using ESG KPIs performance, or any speci昀椀c ESG issues (i.e. carbon emissions, workforce performance, board diversity and makeup, environmental law compliance, etc), in their portfolio companies. Although we are at a base level assessing proof of concept, actual metrics may also be disclosed. Total AUM disclosed as subject to ESG Disclosure of a currency amount of assets under management that are subject criteria or policies to ESG policies or assessment. If a disclosed ESG Policy explicitly states its applicability to total AUM, this will also be considered disclosed. Otherwise, this must be numerical. A list of investors by type (i.e. "family Disclosure of a basic list of client types, often included in UNPRI Public Signatory o昀케ce") Reports. Total assets under management Disclosure of a currency amount of assets under management in ESG funds. This in ESG funds must be numerically disclosed and the fund must be explicitly ESG-directed and not solely subject to ESG criteria or policies. Fund o昀昀erings sold as "ESG" or This is marked as disclosed if the 昀椀rm discloses any fund marketed as an ESG "ESG-themed" funds fund. This also includes ESG-themed funds or funds devoted to impact. Examples may include a "low carbon" fund, a quality governance fund, or a water fund. This refers speci昀椀cally to entire funds, excluding individual ESG-oriented company investments. Total assets under management in Disclosure of a currency amount of assets under management that explicitly target impact or SDG-related companies impact or the UN Sustainable Development Goals. If the 昀椀rm's only directive is impact or SDG investing, this will also be considered disclosed, otherwise, this must be numerical. Fund o昀昀erings sold as "Impact" Any fund o昀昀erings marketed as Impact or aligned with the UN Sustainable or "SDG" funds Development Goals. Investments in companies explicitly Disclosure of individual investments in portfolio companies tied to the Sustainable developing products in line with the Development Goals, clearly stated as such. UN Sustainable Development Goals ↗ Back to Contents
Preqin ESG Solutions 70 Appendix B ESG-Related A昀케liations and Initiatives The UN Principles for Responsible Investment Global Impact Investing Network (GIIN) (UNPRI or PRI) GIIN is a global network of investors, focusing on reducing The PRI is a United Nations-supported international barriers to impact investment by building critical network of investors. Through committing to six aspirational infrastructure and developing activities, education and principles, the signatories of the PRI work together to research to facilitate the development of a coherent impact support the integration of ESG in investment decisions and investing industry. create a more sustainable global 昀椀nancial system. Global Reporting Initiative (GRI) Task Force on Climate-related Financial Disclosures The GRI is a global reporting initiative. Through the GRI (TCFD) Standards, they provide guidance on ESG disclosures for The TCFD was created by the G20 Financial Stability investors and other stakeholders. Board to facilitate and improve reporting of climate- related 昀椀nancial information. It provides a set of disclosure recommendations to support informed capital allocation, Global ESG Benchmark for Real Assets (GRESB) and enhance market participants’ understanding of GRESB is an investor-led organization providing material climate-related risks and opportunities. The standardized ESG data to capital markets. It is considered recommendations focus on four core areas: 1. Governance: the leading ESG benchmark for real estate and the organization’s governance around climate-related risks infrastructure investments. and opportunities. 2. Strategy: the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy and 昀椀nancial planning. 3. CDP Risk management: the processes used by the organization to identify, assess and manage climate-related risks. CDP (formerly known as the Carbon Disclosure Project) 4. Metrics and targets: the metrics and targets used to is a non-governmental organization (NGO) supporting assess and manage relevant climate-related risks and companies, 昀椀nancial institutions and cities in disclosing opportunities. and managing their environmental impact. It runs a global environmental disclosure system in which nearly 10,000 companies, cities, states and regions report on their risks Sustainability Accounting Standards Boards (SASB) and opportunities related to climate change, water security SASB is a non-pro昀椀t organization providing a set of industry- and deforestation. speci昀椀c disclosure standards across ESG topics. The standards are available across 77 industries, and identify Climate Disclosure Standards Board (CDSB) the most relevant ESG issues to 昀椀nancial performance in each industry. Alongside the SASB Materiality Map, these The CDSB is an international consortium of businesses standards help investors determine which ESG issues are and environmental non-governmental organizations (NGOs) material for reporting as well as helping facilitate more committed to advancing and aligning the global mainstream standardized benchmarking. corporate reporting model to equate natural capital with 昀椀nancial capital. ↗ Back to Contents
Preqin ESG Solutions 71 Sustainable Development Goals (SDGs) EU Sustainable Finance Action Plan The SDGs are a set of 17 global goals, established by the The EU Sustainable Finance Action Plan is the European UN General Assembly in 2015. The goals address key global Union’s strategy for sustainable 昀椀nance. It aims to reorient challenges, covering issues such as poverty, inequality, capital 昀氀ows towards sustainable 昀椀nance, manage 昀椀nancial climate change, environmental degradation, peace and risk stemming from ESG issues, and facilitate more justice. They are often referred to in the context of impact transparency and long-termism in 昀椀nancial activities. The investing, as a framework for de昀椀ning and assessing impact. Plan consists of several components, including: 1. The EU Taxonomy: provides a framework for de昀椀ning Institutional Limited Partners Association (ILPA) environmentally sustainable economic activities. It identi昀椀es ILPA is a global organization dedicated to advancing the three criteria an economic activity must satisfy to be interests of limited partners and their bene昀椀ciaries through considered sustainable, and a list of six environmental education, research, advocacy and events. Through their objectives. Due Diligence Questionnaire and Diversity Metric Template, 2. The Sustainable Finance Disclosure Regulation (SFDR): they provide a standardized framework for integrating and imposes a set of disclosure requirements for asset monitoring ESG and DEI. managers and other 昀椀nancial market participants to provide standardized disclosures on how ESG factors are integrated Net Zero Alliances at the entity and product level. Net Zero Alliances include all those a昀케liations committed to supporting the goal of emitting net zero greenhouse gases by 2050 or sooner, aligned with the global e昀昀ort to limit warming to 1.5 degrees Celsius. These include the Net Zero Asset Managers Initiative, Glasgow Financial Alliance for Net Zero, Net-Zero Asset Owner Alliance, Net-Zero Banking Alliance, Net Zero Investment Framework 1.0, Race to Zero, Paris Aligned Initiative Net Zero Asset Owner Commitment, amongst others. Full list of A昀케liations • BVCA – Responsible Investment Advisory Board • ESG Research Australia • CDP Climate Change • Eumedion • CDP Forests • Extractive Industries Transparency Initiative (EITI) • Global Impact Investing Network • Global Investors Governance Network (GIGN) • Global Real Estate Sustainability Benchmark (GRESB) • Green Bond Principles • Institutional Investors Group on Climate Change • HKVCA: ESG Committee • Principles for Responsible Investment (PRI) • Interfaith Center on Corporate Responsibility • United Nations Environment Programme Finance • International Corporate Governance Network Initiative • International Integrated Reporting Council (IIRC) • United Nations Global Compact • Invest Europe Responsible Investment Roundtable • AFIC – La Commission ESG • Investor Network on Climate Risk (INCR)/CERES • American Investment Council (ESG guidelines) • Local Authority Pension Fund Forum • Asian Corporate Governance Association • Net Zero Alliances • Australian Council of Superannuation Investors • Operating Principles for Impact Management • AVCA: Sustainability Committee • Principles for Financial Action in the 21st Century • CDP Water • Principles for Sustainable Insurance • Ceres • Regional or National Social Investment Forums (e.g. • CFA Institute Centre for Financial Market Integrity UKSIF, Eurosif, ASRIA, RIAA), specify • Climate Action 100+ • Responsible Finance Principles in Inclusive Finance • Code for Responsible Finance in the 21st Century • Shareholder Association for Research and Education • Code for Responsible Investment in SA (CRISA) (Share) • Council of Institutional Investors ↗ Back to Contents
Preqin ESG Solutions 72 | Strictness of the requirements: • High: The a昀케liation includes mandatory commitments like targets, disclosures, or reporting. • Medium: The a昀케liation includes/suggests voluntary commitments like targets, disclosures, or reporting. • Low: The a昀케liations does not require any mandatory or voluntary commitments. Membership Composition Key Focus Minimum requirements Ongoing commitments Academia Accountability Application Process Ongoing Active Engagement Companies Advocacy Annual Fee Accomplish Membership Agreement Government Benchmarking Active Engagement Maintain Annual Fee General Partners Climate Mandatory Reporting Mandatory Reporting Limited Partners Corporate Governance Membership Agreement Not Disclosed Service Providers Reporting Not Disclosed Voluntary Reporting Disclosure Voluntary Reporting Environmental, Social Open Membership and Governance by Firm Type Forestry & Biodiversity Impact Investing Net Zero Engagement Policy Research & Data Responsible Investment Sustainable Development Goals Sustainable Finance Transparency Water & Biodiversity ↗ Back to Contents
Preqin ESG Solutions 73 Appendix C ESG Risk Analytics Data Sources and Data Understanding SASB ISSUE Score Type Subscores Raw Data Reading the Score Understanding the Risk Sources High emitting industries in Transition Global Carbon …countries where due to economic countries with dependencies on Geographic subscore; Project; UN dependencies or limited regulatory GHG emitting business are likely Regulatory Comtrade; will to limit GHG emissions. to face higher long term regulatory subscore OECD; IMF; and human burdens due to GHG climate change. Emissions High emitting industries in CDP; US EPA; …industries with high emissions countries with dependencies on Industry None Climate- watch relative to other industries as a GHG emitting business are likely Climatewatch; byproduct of operations. to face higher long term regulatory and human burdens due to climate change. High air pollutant industries in …countries with high countries where existing particulate Geographic None IHME; WHO; concentrations of particulate matter already generates signi昀椀cant matter and/or decreased mortality. human health risk are likely to face higher regulatory and health costs Air Quality associated with those pollutants. …industries where air pollution High air pollutant industries in rates are higher than other countries where existing particulate Industry None NIH; US EPA; industries or where the cost of matter already generates signi昀椀cant health of those pollutants are human health risk are likely to face higher than other industries. higher regulatory and health costs associated with those pollutants. Energy intense industries in …countries where the share of countries with limited renewable Geographic None OECD; renewables in the energy mix is energy resources are likely to face low. higher energy costs over the Energy long term. Management Energy intense industries in …industries where energy demands countries with limited renewable Industry None EIA; are high as an input to production. energy resources are likely to face higher energy costs over the long term. Industries where water is a key JMP; EPI; FAO; …countries with limited sanitation necessary input operating in Geographic Water Lenzen et al and centralized water management countries with limited water (2013); and/or limited water availability. availability or poor infrastructure Water & risk community con昀氀ict, rationing, Wastewater or supply issues. Management Industries where water is a key necessary input operating in Industry None Blackhurst …industries that are water intense countries with limited water (2002); CDP; relative to other industries. availability or poor infrastructure risk community con昀氀ict, rationing, or supply issues. ↗ Back to Contents
Preqin ESG Solutions 74 SASB ISSUE Score Type Subscores Raw Data Reading the Score Understanding the Risk Sources Industries where hazardous waste FAO; Lenzen et …countries with NOX, SOX, or is a byproduct of operations in Geographic None al (2020); Oita pesticide intense imports and countries with high concentrations et al (2016); production. of waste in imports and production Waste & are at risk of regulatory shift and Hazardous human health deterioration. Materials Industries where hazardous waste Management is a byproduct of operations in Industry None US EPA; …industries where hazardous countries with high concentrations Eurostat; material waste intensity is high. of waste in imports and production are at risk of regulatory shift and human health deterioration. Protection Birdlife Industries that are highly polluting, gap International; …countries with limited protection including GHG emissions, subscore; Lenzen et al of biodiverse sites with species particulate matter, water intense, Geographic Import risk (2012); IUCN; threats linked to imports or where or produce hazardous waste, subscore; Ocean Health active mining of biodiverse areas operating in countries with limited Species Index; Curtis et for industry is conducted. protections of biodiversity face risk al (2018); EPI; both biological system risk and Ecological subscore; regulatory change risk. Impacts Industries that are highly polluting, CDP; US EPA; including GHG emissions, Climatewatch; …industries that are highly particulate matter, water intense, Industry None NIH;Blackhurst polluting, either via air, water, or or produce hazardous waste, (2002); hazardous waste or in combination. operating in countries with limited Eurostat; protections of biodiversity face both biological system risk and regulatory change risk. FAO; UNDESA; Industries where human rights World Data issues recur in either operations Maslow Lab; OECD; or the supply chain operating in subscore; World Justice …countries where basic needs are countries with limited access Geographic Communal Project; WHO; not met or highly unequal with to basic needs and social safety safety UNICEF; limited social safety nets. face both reputational/brand risk, Human subscore; Walk Free litigation risk, and market access Rights & Foundation risk. Community (2018); Relations Industries where human rights issues recur in either operations …industries identi昀椀ed by SASB and or the supply chain operating in Industry None SASB; ESG practitioners as facing material countries with limited access human rights risk. to basic needs and social safety face both reputational/brand risk, litigation risk, and market access risk. Data intense industries with a Customer UN Conference …countries lacking either existing history of breaches or breaking Geographic privacy on Trade and or draft legislation or who conduct customer trust operating in legislation Development; broad population surveillance. countries with few consumer data subscore protections face high customer and Customer market access risk. Privacy Data intense industries with a McKinsey; …industries that are data intense history of breaches or breaking Industry None Verizon; with a history of breaches or customer trust operating in Ponemon limited consumer trust. countries with few consumer data Institute; protections face high customer and market access risk. ↗ Back to Contents
Preqin ESG Solutions 75 SASB ISSUE Score Type Subscores Raw Data Reading the Score Understanding the Risk Sources Data intense industries operating ITU; World …countries with high populations in countries with high online Geographic None Bank; with internet access and mobile populations are at greater risk of banking. data breaches and regulatory costs Data Security associated with data protection. Data intense industries operating Verizon; in countries with high online Industry None Ponemon …data intense industries. populations are at greater risk of Institute; data breaches and regulatory costs associated with data protection. Industries o昀昀ering basic needs Chandy and in countries with high rates of Geographic None Seidel (2017); …countries with high income income inequality or poverty face World Data inequality or poverty rates. market access risk and brand Lab; OECD; risk correlating with pricing and Access & business practices. A昀昀ordability Industries o昀昀ering basic needs …industries identi昀椀ed by SASB and in countries with high rates of Industry None SASB; ESG practitioners as facing material income inequality or poverty face a昀昀ordability risks. market access risk and brand risk correlating with pricing and business practices. Recall Industries where warranty costs subscore; …countries with high discretionary are high in countries with high Geographic Consumer OECD; Preqin; spending per capita in jurisdictions recall rates or consumer spending Product spending with high recall rates. are more likely to see higher costs Quality & subscore; in the event of a product failure. Safety Industries where warranty costs Kale, …industries with high warranty are high in countries with high Industry None Meneghetti, costs as a percentage of sales. recall rates or consumer spending Shahrur (2010); are more likely to see higher costs in the event of a product failure. Industries where consumer safety Preexisting risk is a byproduct of product condition World Bank; …countries with a populations of usage in countries with existing Geographic subscore; WHO; Gallup; high health risk factors and limited health risks and limited safety Safety net social safety nets. nets are more likely to see higher subscore; regulatory costs and market access Customer loss. Welfare Industries where consumer safety …industries identi昀椀ed by SASB, risk is a byproduct of product the FTC, and ESG practitioners as usage in countries with existing Industry None FTC; SASB; facing material consumer safety health risks and limited safety risks. nets are more likely to see higher regulatory costs and market access loss. OECD; United …countries where consumer Industries with unfettered access Nations spending is high and consumer to high spending consumer cohorts Geographic None Conference protection legislation is neither are at a high risk of loss of product Selling on Trade and pending nor passed. market access in the event of Practices Development; widespread fraudulent selling. & Product Industries with unfettered access Labeling …industries identi昀椀ed by SASB and to high spending consumer cohorts Industry None SASB; ESG practitioners as facing material are at a high risk of loss of product misselling risk. market access in the event of widespread fraudulent selling. ↗ Back to Contents
Preqin ESG Solutions 76 SASB ISSUE Score Type Subscores Raw Data Reading the Score Understanding the Risk Sources Industries with low unionization …countries where fundamental and low wages in countries with Geographic None ILO; OECD; labor rights are limited and limited labor rights and high unemployment is high. unemployment are at high risk of strike, increased labor costs over Labor time, or regulatory oversight. Practices Industries with low unionization …industries where unionization and low wages in countries with Industry None US BLS; rates are high and median pay is limited labor rights and high low. unemployment are at high risk of strike, increased labor costs over time, or regulatory oversight. …countries with limited Industries with high injury or Alsamawi et fundamental labor rights, high fatality rates in countries with weak Geographic None al (2017); UN work related fatalities, and weak oversight of labor are at a high risk Employee GovData 360; regulatory oversight. of strike, increased labor costs, or Health & market access loss. Safety Industries with high injury or …industries with high lost time to fatality rates in countries with weak Industry None US BLS; injuries or high fatalities. oversight of labor are at a high risk of strike, increased labor costs, or market access loss. Education risk Industries that require highly subscore; UNESCO; …countries with highly educated, educated and highly paid talent in Gender OECD; The highly paid workforces with countries with accessible talent Geographic opportunity Times; IPU; untapped gender-related have a high risk of competitive Employee subscore; World Bank; workforces. employee attraction dynamics and Engagement, Employee increasing employee costs. Diversity & cost Inclusion subscore; Industries that require highly educated and highly paid talent in Industry None US BLS; …industries with highly paid, highly countries with accessible talent educated employees. have a high risk of competitive employee attraction dynamics and increasing employee costs. Industries with limited product OCED; World …countries that generate signi昀椀cant life-cycle design contingencies in Geographic None Bank; UNU-IAS; waste with limited or unknown countries with waste management Product recycling capabilities. weaknesses face higher regulatory Design & and environmental risks and costs. Life-cycle Industries with limited product Management …industries identi昀椀ed by SASB life-cycle design contingencies in Industry None SASB; and ESG practicitioners as facing countries with waste management product life-cycle risk. weaknesses face higher regulatory and environmental risks and costs. National Industries that underspend on Science …countries with limited expenditure future proo昀椀ng in countries with Geographic None Foundation; or experience in science and limited focus on research, science, UNESCO; research. and patents are more susceptible Business OECD; to sudden market change or losing Model out on innovation. Resilience Industries that underspend on National future proo昀椀ng in countries with Industry None Science …industries that, on average, spend limited focus on research, science, Foundation; less on research and development. and patents are more susceptible to sudden market change or losing out on innovation. ↗ Back to Contents
Preqin ESG Solutions 77 SASB ISSUE Score Type Subscores Raw Data Reading the Score Understanding the Risk Sources Industries with high trade cost World Bank; …countries with high exports, operating in countries reliant on Geographic None Transparency corruption issues, and weak labor exports with weak labor rights are International; rights. at risk of being disrupted by supply OECD; Preqin; chain issues resulting in delays or Supply Chain operational costs. Management Industries with high trade cost operating in countries reliant on Industry None WTO; …industries with high median exports with weak labor rights are tari昀昀s. at risk of being disrupted by supply chain issues resulting in delays or operational costs. Industries with high raw material input demand operating in Geographic None World Bank …countries with low raw material countries with limited exports of exports. raw material run the risk of supply Materials disruption, sourcing issues, and Sourcing & operational cost increases. E昀케ciency Industries with high raw material BEA; US input demand operating in Industry None Federal …industries with high raw material countries with limited exports of Reserve; demands and input costs. raw material run the risk of supply disruption, sourcing issues, and operational cost increases. Industries that are physical asset …countries with high climate- heavy in countries where climate IMF; Climate related disasters, sea level rise disasters are increasingly prevalent Geographic None Central; NASA; projections, or urban populations with no 昀椀nancial backstop run the Sedac; in coastal regions with limited risk of stranding assets, increased Physical insurance penetration. insurance costs, and relocation Impacts costs. of Climate Industries that are physical asset Change heavy in countries where climate …industries identi昀椀ed by SASB and disasters are increasingly prevalent Industry None SASB; ESG practitioners as facing physical with no 昀椀nancial backstop run the climate change risk. risk of stranding assets, increased insurance costs, and relocation costs. Industries which are repeat Transparency o昀昀enders of the US Foreign Internation; …countries that are tax havens or Corrupt Practices Act operating in Geographic None World Bank; have weak business disclosure and tax havens or countries with high Tax Justice high perceived corruption. perceived corruption are at high Network; risk of being targeted or scrutinized Business by regulators for corruption. Ethics Industries which are repeat o昀昀enders of the US Foreign Stanford FCPA …industries with high cumulative Corrupt Practices Act operating in Industry None Tracker; settlements under the Foreign tax havens or countries with high Corrupt Practices Act. perceived corruption are at high risk of being targeted or scrutinized by regulators for corruption. Industries that are highly OECD; World …countries with weak regulatory concentrated in countries with Geographic None Bank GovData quality with a high prevalence of weak regulators and known cartels 360; business cartels. are at risk of facing regulatory costs Competitive related to anticompetitive behavior. Behavior Industries that are highly OECD; US …industries with high levels of concentrated in countries with Industry None Census; anticompetitive sanctions and high weak regulators and known cartels industry concentrations. are at risk of facing regulatory costs related to anticompetitive behavior. ↗ Back to Contents
Preqin ESG Solutions 78 SASB ISSUE Score Type Subscores Raw Data Reading the Score Understanding the Risk Sources Industries that are a focus of World Bank …countries with weak rule of law regulation in countries with weak Geographic None GovData 360; and regulatory quality. regulator quality and rule of law Management face the risk of sudden or highly of the Legal variable enforcement costs. & Regulatory Industries that are a focus of Environment George Mason …industries with higher levels of regulation in countries with weak Industry None University; regulatory restrictions. regulator quality and rule of law face the risk of sudden or highly variable enforcement costs. Industries where critical failures are World Bank …countries with low insurance more probable in countries with Geographic None GovData 360; penetration. low insurance penetration face a Critical higher probability of fat tail event- Incident Risk driven cost. Management Industries where critical failures are …industries identi昀椀ed by SASB and more probable in countries with Industry None SASB; ESG practicitioners as facing critical low insurance penetration face a incident risk. higher probability of fat tail event- driven cost. Industries where systemic risk is …countries with weak system prevalent in countries with weak Geographic None World Bank strength, either 昀椀nancial or system and institutional strength GovData 360; ecological, and weak institutional face a higher probability of either oversight. driving or absorbing fat tail costs Systemic Risk related to system failures. Management Industries where systemic risk is …industries identi昀椀ed by SASB prevalent in countries with weak Industry None SASB; and ESG practitioners as facing system and institutional strength systemic risk. face a higher probability of either driving or absorbing fat tail costs related to system failures. ↗ Back to Contents
Preqin ESG Solutions 79 ESG Geography Risk Score Data Sources SASB Factor Indicator Source _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ GHG Emissions CO₂ emissions from fossil fuel combustion and cement production Global Carbon (tCO2/capita) Project GHG Emissions CO₂ emissions embodied in fossil fuel exports (kg/capita) UN Comtrade GHG Emissions Fossil fuel support (OECD, $USDm) OECD GHG Emissions Carbon Pricing Score at EUR60/tCO₂ (%, worst 0100 best) OECD GHG Emissions Implied average (of conditional & unconditional) economy-wide IMF reduction in 2030 C02 emissions as a percentage of the Business as Usual estimate for 2030 Air Quality Annual mean concentration of particulate matter of less than 2.5 IHME microns in diameter (PM2.5) (μg/m³) Air Quality Age-standardized death rate attributable to household air pollution WHO and ambient air pollution (per 100,000 population) Energy Management Share of renewable energy in total primary energy supply (%) OECD Water & Wastewater Management Population using at least basic drinking water services (%) JMP Water & Wastewater Management Population using at least basic sanitation services (%) JMP Water & Wastewater Management Anthropogenic wastewater that receives treatment (%) EPI Water & Wastewater Management Population using safely managed water services (%) JMP Water & Wastewater Management Population using safely managed sanitation services (%) JMP Water & Wastewater Management Freshwater withdrawal (% of available freshwater resources) FAO Water & Wastewater Management Scarce water consumption embodied in imports (m³/capita) Lenzen et al. (2013) Waste & Hazardous Exports of hazardous pesticides (tonnes per million population) FAO Materials Management Waste & Hazardous Production-based SO₂ emissions (kg/capita) Lenzen et al. (2020) Materials Management Waste & Hazardous SO₂ emissions embodied in imports (kg/capita) Lenzen et al. (2020) Materials Management Waste & Hazardous Production-based nitrogen emissions (kg/capita) Oita et al. (2016) Materials Management Waste & Hazardous Nitrogen emissions embodied in imports (kg/capita) Oita et al. (2016) Materials Management Ecological Impacts Mean area that is protected in marine sites important Birdlife International to biodiversity (%) Ecological Impacts Mean area that is protected in terrestrial sites important to Birdlife International biodiversity (%) Ecological Impacts Mean area that is protected in freshwater sites important to Birdlife International biodiversity (%) Ecological Impacts Marine biodiversity threats embodied in imports (per million Lenzen et al. (2012) population) Ecological Impacts Terrestrial and freshwater biodiversity threats embodied in Lenzen et al. (2012) imports (per million population) ↗ Back to Contents
Preqin ESG Solutions 80 SASB Factor Indicator Source _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Ecological Impacts Red List Index of species survival (worst 0100 best) IUCN and Birdlife International Ecological Impacts Ocean Health Index: Clean Waters score (worst 0100 best) Ocean Health Index Ecological Impacts Permanent deforestation (% of forest area, 5 year average) Curtis et al. (2018) Ecological Impacts ECS Ecosystem services (tree, grass, wetland loss) EPI Human Rights Prevalence of undernourishment (%) FAO & Community Relations Human Rights Adolescent fertility rate (births per 1,000 females aged 15 to 19) UNDESA & Community Relations Human Rights Poverty headcount ratio at $3.20/day (%) World Data Lab & Community Relations Human Rights Population with rent overburden (%) OECD & Community Relations Human Rights Fundamental labor rights are e昀昀ectively guaranteed World Justice & Community Relations (worst 0100 best) Project Human Rights Universal health coverage (UHC) index of service coverage (worst WHO & Community Relations 0100 best) Human Rights Children involved in child labor (% of population aged 5 to 14) UNICEF & Community Relations Human Rights Victims of modern slavery (per 1,000 population) Walk Free & Community Relations Foundation (2018) Customer Privacy Data privacy legislation United Nations Conference on Trade and Development Customer Privacy Data privacy draft legislation United Nations Conference on Trade and Development Data Security Population using the internet (%) ITU Data Security Mobile broadband subscriptions (per 100 population) ITU Data Security Adults with an account at a bank or other 昀椀nancial World Bank institution or with a mobile Access & A昀昀ordability Gini coe昀케cient adjusted for top income Chandy and Seidel (2017) Access & A昀昀ordability Poverty headcount ratio at $1.90/day (%) World Data Lab Access & A昀昀ordability Poverty rate after taxes and transfers (%) OECD Product Quality & Safety Jurisdiction of Recall OECD Product Quality & Safety Recalls per USDbn household spending Preqin Product Quality & Safety Household spending per capita OECD Customer Welfare Prevalence of current tobacco use (% of adults) World Bank Customer Welfare Total per capital (15+) consumption (in litres of pure alcohol) by WHO country Customer Welfare Prevalence of obesity, BMI ≥ 30 (% of adult population) WHO Customer Welfare Subjective well-being (average ladder score, worst 010 best) Gallup Selling Practices & Product Household spending per capita OECD Labeling ↗ Back to Contents
Preqin ESG Solutions 81 SASB Factor Indicator Source _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Selling Practices & Product Consumer protection legislation United Nations Labeling Conference on Trade and Development Selling Practices & Product Consumer protection draft legislation United Nations Labeling Conference on Trade and Development Labor Practices Unemployment rate (% of total labor force) ILO Labor Practices Employment-to-population ratio (%) OECD Employee Health & Safety Fatal work-related accidents embodied in imports (per 100,000 Alsamawi et al. population) (2017) Employee Health & Safety Regulatory Quality GovData 360 Employee Engagement, Net primary enrollment rate (%) UNESCO Diversity & Inclusion Employee Engagement, Lower secondary completion rate (%) UNESCO Diversity & Inclusion Employee Engagement, Literacy rate (% of population aged 15 to 24) UNESCO Diversity & Inclusion Employee Engagement, Tertiary educational attainment (% of population aged 25 to 34) OECD Diversity & Inclusion Employee Engagement, The Times Higher Education Universities Ranking: The Times Diversity & Inclusion Average score of top 3 universities Employee Engagement, Ratio of female-to-male mean years of education received (%) UNESCO Diversity & Inclusion Employee Engagement, Seats held by women in national parliament (%) IPU Diversity & Inclusion Employee Engagement, Female share of graduates from STEM 昀椀elds at the tertiary level (%) World Bank Diversity & Inclusion Employee Engagement, Ratio of female-to-male labor force participation rate (%) ILO Diversity & Inclusion Employee Engagement, Gender wage gap (% of male median wage) OECD Diversity & Inclusion Employee Engagement, Gender gap in time spent doing unpaid work (minutes/day) OECD Diversity & Inclusion Employee Engagement, Adjusted net national income per capita (current US$) World Bank Diversity & Inclusion Employee Engagement, Social spending, % of GDP OECD Diversity & Inclusion Employee Engagement, Employment by job tenure intervals average tenure OECD Diversity & Inclusion Product Design & Non-recycled municipal solid waste (kg/capita/day) OECD Life-cycle Management Product Design & Municipal solid waste (kg/capita/day) World Bank Life-cycle Management Product Design & Electronic waste (kg/capita) UNUIAS Life-cycle Management Business Model Resilience Scienti昀椀c and technical journal articles (per 1,000 population) National Science Foundation ↗ Back to Contents
Preqin ESG Solutions 82 SASB Factor Indicator Source _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Business Model Resilience Expenditure on research and development (% of GDP) UNESCO Business Model Resilience Researchers (per 1,000 employed population) OECD Business Model Resilience Triadic patent families 昀椀led (per million population) OECD Supply Chain Management Logistics Performance Index: Quality of trade and transport-related World Bank infrastructure (worst 15 best) Supply Chain Management Corruption Perception Index (worst 0100 best) Transparency International Supply Chain Management Economy where made OECD Supply Chain Management Exports (USD) to Imports (USD) ratio (high = more exports) Preqin Materials Sourcing & E昀케ciency Raw materials Exports by country in US$ Thousand World Bank Physical Impacts of Climate S&P Physical Climate Change Risk Scenarios S&P Global Change Business Ethics Business extent of disclosure index World Bank (0=less disclosure to 10=more disclosure) Business Ethics Corporate Tax Haven Score (best 0100 worst) Tax Justice Network Competitive Behavior Regulatory quality GovData 360 Management of the Legal & Rule of Law GovData 360 Regulatory Environment Critical Incident Risk Management GCI 4.0: Insurance premium GovData 360 Critical Incident Risk Management GCI 4.0: Non-life insurance premiums GovData 360 Systemic Risk Management Financial system strength GovData 360 Systemic Risk Management Quality of infrastructure GovData 360 ↗ Back to Contents
Preqin ESG Solutions 83 Empowering the global alternatives community with essential data and insights. preqin.com [email protected] ↗ Back to Contents