Demands for ESG data continue to grow. As the industry grapples with collecting, monitoring and analyzing this information, access to appropriate technology tools can improve efficiency.
Josh Green, chief operating officer and co-founder at Novata, gives more detail.
What are some challenges the private markets are currently facing with regards to ESG data management?
Collecting high quality data is hard. Many firms still rely on manual processes to collect ESG data from their portfolio companies. As the demand for ESG data grows in private markets, the need for tools to streamline data management processes becomes more apparent. In turn, investors are also looking for intuitive solutions to help them streamline their data collection processes and contextualize performance based on industry benchmarks.
Unfortunately, many ESG solutions offered to private equity firms are not fit for purpose. They are either repurposed ESG solutions that don’t account for the nuances of data collection in the private markets, or they are general solutions that do not incorporate ESG expertise. The Novata solution was designed specifically with input from GPs and LPs to meet the unique needs of the private markets. Our platform makes it easy for investors to collect the metrics that matter, analyze and contextualize this data, and identify actions to improve the performance and value of their portfolio companies. Additionally, we provide in-platform guidance and ongoing support for investors and portfolio companies every step of the way.
When you think about the process of managing large data sets, what are some areas where technology can help investors streamline their processes?
Simply keeping track of who’s responded to requests for information, who hasn’t, and who needs a nudge is challenging in itself, especially when you have a large number of portfolio companies. But in addition to managing the process of data collection, it’s imperative to ensure that data is reported consistently so that it is comparable across companies and over time. Finally, investors also need to be able to sift through large amounts of data and emerge with actionable insights. The right technology solution helps simplify and streamline these processes.
At Novata, we see clients leveraging technology to help with four distinct ESG activities: easily managing data collection, getting insights from the data, generating reports for stakeholders, and driving action to improve the performance and value of portfolio companies. To that end, we’re streamlining the data collection process and providing benchmarking and analysis capabilities that enable investors to determine how portfolio companies compare to relevant peers, set goals, and track progress on the metrics that matter post-investment.
As ESG grows in importance in private markets, how do you see the role of technology solutions evolving?
In private markets, most organizations are focused on the immediate challenge of collecting data, and they are looking for solutions to help tackle this challenge. However, we expect the emphasis to shift from data collection to measuring long-term progress and leveraging insights from the data to improve performance. Technology can help streamline processes, freeing up time for analysis and to work with portfolio companies on solutions that increase company performance and, ultimately, valuation at time of exit. As the needs of the market become more nuanced, technology solutions such as Novata will be a key part of helping firms meet their goals and the increasing expectations from investors, regulators, and other stakeholders.
What should firms look for in an ESG data management solution?
At Novata, we believe that a perfect ESG solution for private markets must combine three essential elements: easy-to-use technology built around the workflow of GPs who are looking to collect data from portfolio companies, metric guidance developed by professionals with deep ESG expertise, and real-time support from dedicated customer success teams.
We also believe that the ESG journey will be long, and there will be many twists and turns in the years ahead. Therefore, it’s important to pick not just a vendor, but a partner that will have the resources to evolve as your needs evolve. This is why Novata recently raised $30 million in Series B funding: to ensure we can invest for the long term and continuously evolve to meet changing sustainability priorities and the unique needs of the private markets.
Source: privateequitywire.co.uk
