Alternative credit managers launch ESG integrated disclosure tool

Standardised template to drive enhanced transparency and accountability

• The ESG IDP template will enhance transparency and consistency for both private companies and credit investors by providing a standard format for ESG-related disclosures.
• The template offers private companies a baseline from which to develop their ESG reporting capacity.
• For investors, the ESG IDP template enhances their ability to identify industry-specific ESG risks in their credit portfolios and compare meaningful data across alternative asset managers more consistently.

The template is the creation of the ESG IDP, an industry initiative bringing together leading lenders in the private and syndicated credit markets to improve transparency and accountability. The ESG IDP is led by the Alternative Credit Council (ACC), the private credit affiliate of the Alternative Investment Management Association (AIMA), the Loan Syndications and Trading Association (LSTA), and the United Nations-supported Principles for Responsible Investment (PRI).

Founding partners of this new initiative include Apollo Global Management and Oak Hill Advisors who, along with the ESG IDP’s Executive Committee, will now spearhead efforts to promote the adoption of the ESG IDP template across the market.

The ESG IDP is also supported by a coalition of market stakeholders including CDP, the ESG Data Convergence Initiative and the Loan Market Association.

Jiri Krol, Global Head of the Alternative Credit Council, said: “SMEs and mid-market businesses require a more proportionate approach to ESG disclosure than large public corporates. By simplifying and harmonising existing market practices, this new industry-led initiative will reduce the burden on borrowers while improving the materiality and comparability of ESG disclosure for investors. We look forward to working with our members and partners to support the widespread adoption of this disclosure template.”

Tess Virmani, Executive VP and Head of ESG at LSTA, said: “Investors and regulators have made it clear that the status quo is untenable, and the credit market recognizes the need for harmonized ESG reporting. We are delighted to officially launch this resource – harmonization is the critical next step in improving the availability of consistent, reliable ESG information and furthering the responsible growth of ESG in credit markets.”

Carmen Nuzzo, Head of Fixed Income at the PRI, stated: “Taking the cue from the PRI’s ESG Factor Map, which pointed out the substantial overlapping of many competing ESG standards and frameworks, this new template will allow private creditors to have a ‘bigger voice’ during the investment process. It will streamline ESG information collection, whilst providing opportunities for meaningful conversations with borrowers. Its success now requires adoption, which we strongly urge, together with the other ESG IDP supporters.”

Michael Kashani, Head of ESG Credit at Apollo and the inaugural Chair of the ESG IDP, stated, “I am thrilled to be a part of the ESG IDP as it represents an important step in addressing ongoing ESG disclosure challenges in the private credit markets. We believe that this harmonized approach will increase the availability of ESG disclosure for both LPs and GPs.”

Jeff Cohen, Head of ESG & Sustainability at Oak Hill Advisors and the inaugural Vice Chair of ESG Integrated Disclosure Project, stated: “We are excited to contribute to and support the ESG IDP, which applies a credit lens to the globally-recognized SASB standards to prioritize the subset of ESG factors most likely to be core to a company’s operations and, as a result, beneficial to lender underwriting. The ESG IDP aligns with sponsor interests and addresses questionnaire fatigue felt by companies.”

Catherine Isabelle, Senior Director, Responsible Investment, PSP Investments and Lead of the EDCI’s Private Debt Working Group, member of the EDCI Steering Committee, said: “The ESG Data Convergence Initiative (EDCI) supports the inclusion of EDCI metrics within the ESG Integrated Disclosure Project template. We believe that the technology-enabled disclosure of the EDCI metrics within the template will provide better information for both LPs and GPs to drive improvements over time on critical issues.”

Radhika Mehrotra, Associate Director, Capital Markets, CDP North America, said: “CDP recognizes the value of the ESG Integrated Disclosure Project (ESG IDP) and how it aims to increase the availability and comparability of material ESG disclosure for both LPs and GPs investing in the private and broadly syndicated credit markets.”

Gemma Lawrence-Pardew, Head of Sustainability, Director – Legal, Loan Market Association, stated: “Reliable and accurate ESG information is vital in order for investors to channel capital into sustainable activities and companies. The ESG Integrated Disclosure Project provides a clear and transparent approach for the disclosure of ESG information, and provides clarity to companies regarding the information investors need. The LMA are delighted to support such a valuable project.”

FAQs

Where can I find the ESG Integrated Disclosure Project (ESG IDP) template?

The template and supporting educational materials are available at www.esgidp.org.

Who should/can access it?

The template is accessible to anyone. It is designed to be completed by borrower companies and shared with their lenders. Companies may access the template themselves or it may be shared with them by their lender(s) (or the arranger in a syndicated loan).

What next?

The Executive Committee of the ESG Integrated Disclosure Project will review the template and make any necessary updates on an annual basis.

About the Alternative Credit Council (ACC)

The Alternative Credit Council (ACC) is a global body that represents asset management firms in the private credit and direct lending space. It currently represents 250 members that manage over US$600bn of private credit assets. The ACC is an affiliate of AIMA and is governed by its own board which ultimately reports to the AIMA Council. ACC members provide an important source of funding to the economy. They provide finance to mid-market corporates, SMEs, commercial and residential real estate developments, infrastructure as well the trade and receivables business. The ACC’s core objectives are to provide guidance on policy and regulatory matters, support wider advocacy and educational efforts and generate industry research with the view to strengthening the sector’s sustainability and wider economic and financial benefits. For more information, visit www.lendingforgrowth.org.

About LSTA

The LSTA is a not-for-profit trade association that is made up of a broad and diverse membership involved in the origination, syndication, and trade of corporate loans. The 600-plus members of the LSTA 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 policies and market practices designed to promote just and equitable marketplace principles and to encourage cooperation and coordination with firms facilitating transactions in loans. Since 1995, the LSTA has developed standardized practices, procedures, and documentation to enhance market efficiency, transparency, and certainty. For more information, visit www.lsta.org.

About Principles for Responsible Investment (PRI)

The Principles for Responsible Investment (PRI) is the world’s leading proponent of responsible investment. Supported by the United Nations, it works to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole. Launched in New York in 2006, the PRI has grown to more than 5,000 signatories, managing over $120 trillion AUM.

Contacts

Profile Advisors for LSTA
Rich Myers
[email protected]

AIMA
Drew Nicol
Associate Director, Research and Communications
[email protected]

PRI
Rojîn Kiadeh
Acting Head of Press
[email protected]

Apollo Global Management
Joanna Rose
Global Head of Corporate Communications
[email protected]

Oak Hill Advisors
Natalie Harvard
Head of Investor Relations & Partner
[email protected]