SEP (Scottish Equity Partners) is a leading European growth equity investor specializing in enterprise software and technology scale-ups. As investors in innovative companies, SEP strongly believes in the power of technology as a force for good and recently found themselves at a crossroads in their ESG data collection journey. With a portfolio of over 20 companies, SEP’s ESG & Sustainability Lead, Matthew Sumner, knew they needed to evolve beyond manual data collection practices to better support their portfolio and sustainability ambitions. “The existing use of spreadsheets as a reporting system was unable to keep pace with our ESG goals,” Matthew described.
Managing ESG Data
In light of the rapidly evolving sustainability landscape and increasing volumes and complexity of ESG data, it became clear that a more sophisticated approach to data collection was necessary. Many of SEP’s portfolio companies benefit from the firm’s guidance and support in developing sustainability strategies, particularly when addressing complex topics like carbon accounting. These subjects often require gathering numerous data points to ensure accuracy and insight.
SEP formalized its ESG policy and started collecting data in 2012. In 2020, the firm launched its proprietary Sustainable Growth Framework, featuring over 100 ESG data points. Integrating this historical data into a cohesive platform became crucial for increasing accessibility, reducing inherent data risks, and improving accuracy for both SEP and its portfolio.
Determining What to Measure
Balancing regulatory complexity with the specific needs of scaling enterprise software and tech-enabled businesses was another hurdle. SEP wanted to ensure that its data collection efforts were proportionate, focusing on the most relevant metrics for growth-stage software companies. At the same time, the firm sought to meet regulatory requirements without imposing unnecessary burdens, striving for a balance that allowed for meaningful insights and ambition without overwhelming businesses.
Additionally, SEP was looking to benchmark its insights against industry standards. This comparison was crucial for understanding how its portfolio was performing in a broader market context. As Matthew explained, “All data needs context, and with a relevant benchmark, you can provide further insights and drive ambition.”
Impact and Results
SEP engaged Novata in 2023 to improve data collection processes and increase performance insight. Some highlights from the first year of using Novata include:
- # of Metrics Collected from Portfolio Companies: 100+
- Time frame for data collection: 1 month
- Portfolio response rate: 95%
- # of portfolio companies reporting carbon data: >80% (75% increase from 2022)
Outcomes
- Simplified data collection process for portfolio companies, facilitating easy submission
- Aligned metrics with the ESG Data Convergence Initiative (EDCI) framework, streamlining the process and increasing consistency of metrics
- Integrated historical data in one place and enhanced data quality and completion rates
- Supported the production of a comprehensive Responsible Investment report with a single source of truth for data, improving communication with investors and stakeholders
- Enabled year-over-year data tracking and comparison across portfolio companies and industry averages using Novata Benchmarks to analyze data in context
Matthew noted, “Being able to see last year’s response, allocate sections to the most appropriate management teams, and save progress along the way made the process significantly easier this year for our portfolio companies.”
Looking Ahead
SEP is “always striving for continuous improvement,” Matthew said, both in terms of advancing its sustainability goals and those of its portfolio. The firm plans to further streamline its ESG processes: “My goal is for management teams to spend more time executing innovative initiatives that support their ambitious ESG strategies, while gaining deeper insights and reducing the burden of reporting,” he concluded.
