May 1, 2023

How to Create Value with ESG Data

As general partners (GPs) wrap up the ESG data collection process with portfolio companies, focus is shifting to how best to leverage the information. Environmental, social, and governance factors have become key considerations for investment decisions, with investors looking at this data to mitigate risks and increase the financial value of their portfolios. To create action from opportunities, GPs must understand how to analyze and interpret their portfolio’s data set.

Novata recently published “From Collection to Action: A GP’s Guide to Creating Value with ESG Data” to help investors navigate the post-data collection process. The eBook breaks down how investors can begin to contextualize ESG data and use the resulting insights to drive long-term, sustainable change across the portfolio, including:

  • What to look for when reviewing your ESG data set
  • How to use the data to identify priorities to improve financial value
  • How to engage with portfolio companies on key opportunities
  • Best practices for action planning

Below are a few highlights from the guide:

  1. When reviewing an ESG data set, comparing against firm priorities, portfolio company materiality, and benchmarks will provide key context for understanding data.
  2. To set priorities, start with opportunities with a positive financial impact and the metrics most relevant, timely, and impactful for improving performance.
  3. Align ESG conversations with your firm’s engagement strategy, keeping in mind how your relationship to the company may affect your approach.
  4. Specificity and clarity about deliverables are essential for successful action planning. Additionally, providing guidance and context around specific actions can go a long way to keeping portfolio companies engaged.

Moving from collection to action on the metrics that matter will be crucial for investors to demonstrate year-over-year improvements in performance and increase the financial value of portfolio companies. Download the eBook here to learn more about creating value with ESG data.