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What We’ve Learned Automating the ESG Data Convergence Initiative (EDCI) for Clients​

Last year, private equity firm the Carlyle Group and pension fund the California Public Employees Retirement System (CalPERS) announced what could become a game changer for the private equity industry. The ESG Data Convergence Initiative, or EDCI, seeks to standardize ESG reporting for general partners (GPs) by creating a single framework for them to follow. The aim is to generate a critical mass of comparable information on how GPs’ portfolio companies are performing on ESG relative to each other, as well as to promote greater reporting transparency for limited partners (LPs). The data will be aggregated into an anonymized benchmark by the Boston Consulting Group (BCG). Thus far, 59 leading LPs and 121 GPs have agreed to participate in the project, or perhaps what at this point one can termed an experiment, that together represent over $8 trillion in assets under management. If successful, EDCI would be a breakthrough for the industry. Harmonizing ESG disclosures for private markets has conventionally been a gap in the financial market and is essential for sustainability efforts to be credible. In this case, the very investors demanding ESG are setting the parameters of what that means to them, and benchmarking that data to produce an overall picture of the ESG health of the industry.

On the other hand, EDCI does not (so far) provide guidance on how companies can best produce this data. What its benefits will be for GPs, who must now take on an additional reporting burden, will become clearer in the fullness of time.

ESGTree has had the privilege of automating the EDCI framework for its clients to ease this reporting burden. In the process, we have learned three key lessons about implementing the EDCI framework and the significance of it: