Professional Credit Associations Partner with PRI for ESG Credit Harmonization
LONDON–(BUSINESS WIRE)–The Alternative Credit Council (VAC), the Loan Syndication and Trading Association (LSTA) and the Principles for Responsible Investment (IRP) join forces to align lenders and private equity sponsors to support the disclosure of material and consistent ESG data in credit markets.
This effort was launched Last year by the PRI – which is backed by the United Nations and represents signatories with over $120 trillion in assets under management – to standardize ESG information shared during the investment process. The PRI worked closely with a group of signatories to develop a pre-investment ESG due diligence model for target portfolio companies. The model maps the many existing ESG standards and frameworks rather than adding them. Through this work, the PRI was able to highlight common issues and synergies between different frameworks.
The model is in its final stages and the PRI will publish it later this spring, once feedback from PRI, LSTA and ACC signatories has been incorporated. It is ‘one size fits all’, but investors can use it to suit their needs, depending on their role in the investment chain.
Today, the PRI, LSTA and ACC announce a further step to develop a harmonized ESG reporting tool for creditors. This tool will enable the consistent collection of data from sponsored and non-sponsored borrowers in private and heavily syndicated credit markets.
This project is ambitious and its success will require the collaboration of all market players. The PRI, ACC and LSTA invite more organizations to join this effort to promote the long-desired industry convergence in corporate reporting.
Carmen Nuzzo and Peter Dunbar, respectively Head of Fixed Income and Private Equity at PRI, commented: “We are happy to see that the collaborative work we initiated last year is bearing fruit and encouraging industry convergence. One of the main issues with private market monitoring and reporting is that there are several competing frameworks. We are at a tipping point and call on the owners of these frameworks to work with us, the LSTA and the ACC to drive harmonization.
Tess Virmani, Executive Vice President and Head of ESG at LSTA, said: “The LSTA is delighted to work with our partners on this important project. The wide adoption of the LSTA ESG Due Diligence Questionnaire demonstrates that credit market participants recognize the need and are ready for ESG reporting. Harmonization is the crucial next step to improving the availability of consistent and reliable ESG information.
Jiří Król, Global Head of the Alternative Credit Council, said: “The availability and consistency of ESG data is a major challenge for private credit managers and we hope that through this open and collaborative process we will be able to create a global platform to support this growing segment of private markets. We are extremely pleased to join the LSTA and UN PRI on this vital initiative and look forward to working closely with other interested parties.
About the Principles for Responsible Investment:
The Principles for Responsible Investment (PRI) are the world’s leading promoter of responsible investment. Supported by the United Nations, it strives to understand the investment implications of environmental, social and governance (ESG) factors and to help its international network of signatory investors to integrate these factors into their investment decisions and of property. The PRI act in the long-term interests of its signatories, the financial markets and economies in which they operate and, ultimately, the environment and society as a whole. Launched in New York in 2006, the PRI now has over 4,800 signatories managing over $120 trillion in assets under management. For more information, visit www.unpri.org.
About the LSTA:
The LSTA is a not-for-profit trade association made up of a wide range of members involved in the origination, syndication and trading of commercial loans. LSTA’s 575 members include commercial banks, investment banks, broker-dealers, hedge funds, mutual funds, insurance companies, fund managers and other institutional lenders, as well as service providers and vendors. The LSTA undertakes a wide variety of activities to foster the development of market policies and practices designed to promote fair and equitable market principles and to encourage cooperation and coordination with businesses facilitating loan transactions. Since 1995, the LSTA has developed standard practices, procedures and documentation to improve market efficiency, transparency and certainty. For more information, visit www.lsta.org.
The Alternative Credit Council (ACC) is a global body representing asset management companies in the area of private credit and direct lending. It currently represents 250 members who manage over $600 billion in private credit assets. The ACC is an affiliate of AIMA and is governed by its own Board of Directors which ultimately reports to the AIMA Council. CCA members are an important source of financing for the economy. They provide financing to middle market companies, SMEs, commercial and residential real estate developments, infrastructure as well as commercial and receivables activities. ACC’s primary objectives are to provide advice on policy and regulatory issues, support broader outreach and education efforts, and generate industry research with a view to enhancing the sustainability of the sector and wider economic and financial benefits. For more information, visit www.lendingforgrowth.org.