In a move to improve transparency and consistency regarding environment, social and governance disclosures for private companies and credit investors, a group of alternative asset managers have launched a template for ESG disclosure. [Source]
The ESG Integrated Disclosure Project template is intended to provide a standard format for ESG-related disclosures and to offer companies a baseline from which to develop their ESG reporting capacity. The project is led by the Alternative Credit Council–the private credit affiliate of the Alternative Investment Management Association–the Loan Syndications and Trading Association and the United Nations-supported Principles for Responsible Investment.
“By simplifying and harmonizing 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,” Jiří Król, global head of the Alternative Credit Council, said in a statement.
The group behind the template says it was designed to be completed by borrower companies and shared with their lenders. Companies can access the template themselves or share it with their lenders or the arranger in a syndicated loan. The group also said the executive committee spearheading the project will review the template and make any necessary updates on an annual basis.
The Alternative Credit Council represents 250 asset management firms that manage over $600 billion of private credit assets. The LSTA is a not-for-profit trade association that includes commercial banks, investment banks, broker-dealers, hedge funds, mutual funds, insurance companies, fund managers and other institutional lenders.
The template’s launch comes as business, associations and financial regulators increasingly seek out ways to standardize ESG and climate-related disclosure data. Earlier this year, the Securities and Exchange Commission said ESG-related issues would be a major focus of the regulator this year. In particular, it wants to know if investment advisers and registered funds are accurately disclosing ESG investing approaches and if they have controls in place to prevent securities laws violations regarding the disclosures.
The SEC also proposed in March rule changes that would require publicly traded companies to disclose climate-related risks that are “reasonably likely to have a material impact” on their businesses, earnings results, or financial condition. The climate-related risk information would also include disclosure of greenhouse gas emissions, as well as certain climate-related financial metrics in an audited financial statement.