ESG data initiatives are shedding new light on value drivers, but more innovation is needed to keep pace with investor demand.
Surging interest from institutional investors in private markets is propelling a data revolution across the sector, replacing its traditional opacity with the bright sunlight of sustainability metrics.
A number of market initiatives have emerged to increase transparency as asset owners and managers increase allocations and attempt to better understand risks — and value.
ESG Data Convergence Initiative (EDCI) and InvestEurope’s ESG template are among the key efforts to increase the flow of high-quality and standardised ESG data to investors in lieu of legal frameworks, and even a rollback of existing regulation as Europe reassesses the balance of climate regulation against competition.
The UN Principles for Responsible Investment is focused on the issue too, setting out an ESG Factor Map to improve standardised information exchange between portfolio companies, private credit and private equity investors and lenders before investment. Meanwhile, its Private Markets Decarbonisation Roadmap (PMDR) and greenhouse gas (GHG) emissions standard for private equity have helped standardise and streamline climate-related reporting.
It comes as institutional investors ramp up private market allocations and look to better understand their risk, reward and sustainability trade-offs. A 2025 study from Aviva Investors found that more than half of global institutional investors expect to raise allocations further over the next 24 months.
Today, portfolio companies face requests from different limited (LPs) or general partners (GPs), which each have their own templates, KPIs and frameworks – but are effectively asking for the same data. This is laborious for portfolio companies, and a lack of standardisation makes it difficult for asset managers to zoom out and understand broader trends such as risk and return profiles.
It marks a systemic change for private market reporting as the sector moves toward metrics that are comparable and aligned with their public markets counterparts.
A shift in allocation
Asset owner behaviour is driving change. Morningstar’s Voice of the Asset Owner survey shows ESG data for private markets is a top priority for global asset owners, reflecting concern about systemic risks that affect investments and cut across portfolios. Such risks include climate change, reputation and even competitiveness.
It’s tied to a broader trend, according to Anya Levine, Head of Market Strategy at Morningstar Sustainalytics: the convergence of the public and private markets.
“The expectation for mid‑ to large‑size asset managers is that they want to be able to start to track similar ESG metrics for their private markets exposure as they do for their public markets book,” she told Sustainable Investor.
Global asset owners already allocate about 20% of portfolios to private markets, per the Morningstar report. Investors expect that to rise two percentage points annually over five years, or 10% across the board.
Against that backdrop, asset owners now treat public and private allocations as parts of a single exposure. They are looking for consistent proof points across both to bring private markets in line with their regulatory and fiduciary obligations, which are increasingly being mandated at a country-level.
Released this week, Morningstar Sustainalytics’ inaugural ESG Data Report underlined investor priorities, with 47% flagging incomplete data across asset classes, leading the firm to highlight ESG data availability across private equity, real assets and other alternatives as “a new challenge for investors and research providers alike”.
While regulatory initiatives are a key driver of disclosures, the ESG backlash, affecting the US in particular, complicates the expansion of regulation and puts action in the hands of the industry rather than politicians. This adds greater complexity in understanding macro trends as disclosure is permission-based, Levine said, meaning only approved users can view information on specific portfolio companies.
Regulatory and fiduciary responsibility
Pension funds in particular are being incentivised to invest in productive assets, giving them the mandate to scrutinise private markets in greater depth. The UK’s Mansion House Accord has earmarked 10% of major pension providers’ defined contribution (DC) default funds to private markets, with the Financial Conduct Authority’s refreshed guidance on long-term asset funds (LTAFs) allowing pension funds to invest in a greater number of structures.
With the European Commission’s ELTIF 2.0 also smoothing access to private markets investments, European asset owners and public institutions have been early drivers of ESG data collection, given their exposure to regulation.
The European Investment Fund (EIF) mandated the InvestEurope reporting framework across its portfolio. This has effectively embedded the EDCI dataset too, given the crossover in metric requests. “Any European manager that has EIF as an investor would have enough information to fill out the EDCI report,” Clare Murray, Managing Partner at climate tech fund Blume Equity, told Sustainable Investor.
Pressures are spilling over onto US private equity and credit investors, however, as they have European LPs, Levine said.
The metrics that matter
Initiatives such as the EDCI and InvestEurope template have emerged to facilitate and standardise private-market reporting on sustainability. EDCI was launched in 2021 by LPs and GPs including CalPERS, Carlyle and EQT to align on a handful of core KPIs that can be applied across industries rather than bespoke, sprawling questionnaires.
“It’s metrics like Scope 1-3 emissions, renewable energy usage, how many injuries were experienced? Do you run an employee survey? What’s the diversity of your management team? What’s the employee turnover rate? How many jobs did you create last year?,” said Ben Morley, who leads Boston Consulting Group’s (BCG) support of asset managers and LPs on sustainability, including in setting up the EDCI framework.
This helps to simplify LP reporting, said Murray, who counts AP4, one of the Swedish major pension funds, Australian superannuation fund Queensland Investment Corp, and government entities such as the EIF and British Business Bank as LPs. Even if such investors are not EDCI members themselves, “they like it when we send them data and so they are happy to receive the EDCI report,” she said.
High-quality data is just the first step. It also needs to be interoperable across frameworks to really raise the bar across private markets, said Oliver Nixon, Research Lead at Reframe Venture, which helps venture capital firms and LPs embed responsible investment and ESG into their processes.
Reframe Venture supported work on its ESG reporting template, first published in 2022 and reviewed in 2024 to better fit venture and large LP needs. The template was built by mapping existing regulations and frameworks, including EU Sustainable Finance Disclosure Regulation (SFDR) and EDCI, to ensure they are all aligned, said Nixon.
To Murray’s point, the idea was that if someone completes InvestEurope, they can complete all other templates, Nixon added.
Understanding risk — and reward
It’s not just about regulatory pressures, however; management of risks and rewards is a key driver of data demand.
For impact investors, a lack of high-quality and accurate data on ESG issues makes it more difficult to justify allocations to LPs, boards, or broader shareholders. With this data, they can benchmark investments against industry peers and understand how they perform versus non-ESG related stakes.
For managers like Blume, there’s a clear payoff. “If you input the data, you get data,” Murray observed of EDCI, noting that the return is anonymised. “You can see how you’re comparing and how your companies compare to that sector at similar stages.”
That benchmarking helps Blume “communicate to our LPs how we are actually doing what we say we will”. In all, it strengthens credibility and trust, she said.
Poor‑quality or inconsistent data can mean ESG risks are misjudged. It also leads to a potential mispricing of risk where physical climate risks, transition risks, or controversies are not systematically captured — meaning this information is commercially useful.
The latter point is underlined by BCG’s Morley; the aim with EDCI was to create a framework that was meaningful from both a societal and commercial perspective, he said. “If you understand this data set, you can build stronger businesses as a result,” he added.
Morningstar Sustainalytics, for example, expanded its controversies tracker into private markets, Levine said. It was already tracking around 5,000 private entities and is now piloting controversies research for 30 startups valued at US$1 billion or over. “You really want to ensure you’re monitoring ESG controversies, because that reputational risk could potentially have an outsized impact,” Levine added.
There are some early indications of the financial benefits to investors of improved ESG data: sustainability-linked projects increased EBITDA between 4% and 7% over their lifetimes, per BCG.
Creating real value
According to Reframe Venture’s Nixon, investors need time series data — repeated, comparable reporting across years — to really understand impact and ESG’s financial opportunities at scale, which is another key driver.
However, there is concern that frameworks inspired by the public markets or by private equity, which has advanced a lot on this over the years, may not actually be relevant for early investments. There needs to be more nuance in terms of company stage and investor role, said Murray at Blume Equity.
“What’s most important is materiality, and so you want to get what is relevant for that business at that stage, and then who’s who’s asking for this data? How much can they actually require companies to do?” she added.
Reframe Venture has leaned into just that issue, attempting to get investors to think about what they need rather than “just ticking boxes”, said Henry Philipson, a Council Member at the organisation, who also heads marketing and communications at venture capital fund Beringea and founded ESG_VC, an early initiative to encourage ESG data collection in venture.
The goal is interoperable infrastructure that removes as much friction as possible for all stakeholders. InvestEurope has developed a machine-readable version to facilitate data transfer between platforms and tools, helping avoid manual duplication, but Nixon wants to see an API-based data transfer fully integrated into ESG reporting in the future.
Meanwhile, EDCI was initially designed for private equity but widened its scope in 2024 to include infrastructure owners, private credit and venture. The organisation has worked with the Integrated Disclosure Project (IDP), which developed its own reporting template for private companies and credit investors, and industry body the Global Infrastructure Investor Association (GIIA).
EDCI, Invest Europe template, and similar frameworks have emerged as a baseline expectation as industry action outpaces regulation. ESG data collection and standardisation is part of standard due diligence, risk management, and offers opportunities for greater long-term gains through benchmarking.
In an increasingly volatile world, emphasis on this can’t be understated. “They’re collecting this data because it’s important to build stronger businesses,” Morley said of asset managers. “And I think it continues to be true even in a more unstable, unpredictable environment.”
The industry is just at the early innings, and the data points requests will likely expand over time, reflecting wider trends in the information flows sought from portfolio companies. Levine sees a growing interest in topics like biodiversity; Philipson sees attention on workforce and people‑related metrics; and EDCI has implemented a new cybersecurity metric.
The challenge will be to provide greater transparency, without burdening the value creation that attracts investors to the private markets in the first place.
Philipson added: “These initiatives are a way of trying to put that conversation to bed and saying, let’s adhere to a single standard, and then we can hopefully get on to the good work of actually driving some meaningful impact within companies.”
