A consortium of alternative asset managers announced the launch of the ESG Integrated Disclosure Project (ESG IDP) template, a new instrument designed to standardize the structure of ESG disclosures for the private credit market.
The new initiative was founded by partners including Apollo Global Management and Oak Hill Advisors and is led by the private credit affiliate of the Alternative Investment Management Association, the Alternative Credit Council (ACC), the Loan Syndications and Trading Association (LSTA), and the Principles for Responsible Investment, which are backed by the United Nations (PRI).
Michael Kashani, who is the Head of ESG Credit at Apollo and the Founding Chair of the ESG IDP, said:
"I am happy to be a member of the ESG IDP as it represents a significant step toward addressing persistent ESG disclosure issues in the private credit markets. We believe this standardized methodology will expand the availability of ESG disclosure for both limited partners and general partners."
By establishing a common structure for ESG-related disclosures, the new template intends to increase openness and consistency for private enterprises and credit investors, as per the ESG IDP. One of the initiative's primary goals is to ensure that firms of all sizes, including SMEs, can supply the ESG-related data sought by lenders.
The template provides both a standard reporting tool and a guide for borrowers regarding the ESG expectations of lenders. The tool has a collection of broad, industry-agnostic questions that provide a baseline ESG assessment of the borrower's firm, in addition to industry-specific questions derived from SASB guidelines.
The new tool is meant to help people in the private credit market in a number of ways. For example, it will improve the consistency of disclosures for investors, which will help them find and evaluate industry-specific ESG risks in their portfolios. It will also help borrowers understand which ESG indicators are most important to lenders and let them focus on specific disclosures.
Jeff Cohen, Head of ESG and Sustainability at Oak Hill and Vice-Chairman of the ESG IDP, stated:
"We are pleased to contribute to and support the ESG IDP, which applies a credit lens to the globally-recognized SASB criteria to highlight the subset of ESG elements most likely to be fundamental to a company's operations and, as a result, advantageous to lender underwriting. The ESG IDP is aligned with sponsor interests and tackles firms' questionnaire fatigue."