June 15, 2023

Novata Benchmarks in Action: ESG Policy Trends from Private Markets

Novata’s recent benchmarks release provides essential insight into the metrics that matter to private market participants. The benchmarks are de-identified and aggregated from thousands of privately-held companies reporting in the Novata platform. Reviewing the benchmarking data reveals some interesting trends on private company ESG performance based on how they responded to requests from general partners (GPs) on ESG-related actions and initiatives.

One key insight is the adoption of policies that portfolio companies have to guide their behavior on topics material to their business. Policies are the foundation of a company’s ESG initiatives and provide necessary structure around strategy, process, and goals. For investors, having a policy in place indicates that the portfolio company is aware of material risks and taking steps to mitigate negative impacts. 

The chart below reflects the companies across sectors that indicated they had the requested ESG-related policy when reporting to their GPs. 

According to the data, companies still have some ways to go when it comes to implementing a structured approach to gender pay equity. Only 44.6% of the reporting companies have a formal Equitable Pay Policy outlining their approach to ensuring equitable pay for all employees within their organization. Pay equity is an important element of a company’s diversity, equity, and inclusion (DEI) strategy that can positively impact the bottom line by reducing employee turnover, avoiding costly discrimination lawsuits, and improving productivity and morale. Investors interested in championing pay equity within their portfolio can check out this article for four actions to get started. 

On a more positive front, 98% of reporting companies reported that they have an Anti-Harassment policy, underscoring a commitment to employee wellbeing and safety in the workplace.

Comparatively, reporting companies are leaning in on security policies. About 87% of reporting companies have a cybersecurity policy, and 89% have a formal data privacy policy. Cybersecurity, data security, and customer privacy are significant corporate governance risks. Depending on a company’s size, industry, and location, security and privacy best practices may differ, but companies can get started in the right direction by outlining their security measures in a documented policy.

Some other notable policies companies reported on include a Disaster Recovery Policy (86%), Whistleblower Policy (73%), and Human Rights Policy (58%).

As demand for ESG data continues, understanding how portfolio companies compare to peers will be important for gaining a competitive advantage and understanding best practices. Novata Benchmarks help investors contextualize their portfolio’s data to better understand ESG performance and inform business decisions. To learn more about Novata Benchmarks, visit this page or reach out to us

Novata Benchmarks (the “Benchmarks”) are intended for informational purposes only and are neither intended nor implied to be a substitute for professional advice. The Benchmarks represent industry averages and do not represent the specific performance of any individual company, fund, product, or service. Read the full disclaimer.