For many private market firms, environmental, social, and governance (ESG) data is an indispensable consideration throughout the investment lifecycle. From the earliest stages of due diligence to ongoing monitoring post-investment, ESG data provides a comprehensive view of a portfolio company’s risks and opportunities and valuable insights into how companies address critical issues.
Having a robust process for evaluating this data is necessary to make informed decisions. Scoring a company’s ESG performance against a well-defined rubric is one way for GPs to measure performance during the due diligence process. A scoring system enables deal teams and ESG specialists to identify key areas for improvement, assess a company’s risks and opportunities, and determine whether a company aligns with the fund’s investment criteria.
Done manually, scoring can be time consuming, often requiring teams to work closely with multiple portfolio companies on collecting the data, organizing it in Excel, and exporting the information for further review and reporting. To help simplify the process, Novata recently introduced a new ESG due diligence scoring feature for deal teams to better leverage data collected from their portfolio companies on the platform and see how they perform against peers.
Novata provides a flexible system that enables ESG teams and deal teams to create and customize scoring rubrics and tailor questionnaires based on their organization’s established framework — saving teams time with a faster scoring process and making it easy to meet specific needs and expectations, whether it’s from investors, regulators, or internal stakeholders. Users have the ability to manually edit scores and share relevant reporting. This level of flexibility also allows deal teams and ESG specialists to assess companies across various sectors and regions while still maintaining consistency in the questions.
Beyond due diligence, continuing this practice post-investment can help demonstrate the tangible impact of ESG initiatives with clear metrics on progress against goals that align with the firm’s priorities.
The growing demand for more granular ESG data means investors need to not only report on data, but also demonstrate how it is used to drive real-world results. Moreover, increasing pressure from regulatory bodies for transparent, quantifiable ESG performance means that GPs will need to have a strong grasp on the data reported by portfolio companies. Learn more about how Novata can help simplify ESG data collection, analysis, and reporting across the investment lifecycle.
Novata does not calculate, produce, or report ESG scores. Novata provides a tool for organizations to create ESG scores based on the organization’s methodology.
