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November 15, 2022

Alternative credit managers launch ESG tool

By Patrick Brusnahan

A group of alternative asset managers and industry firms have launched the ESG Integrated Disclosure Project (ESG IDP) template.

The template’s goal is to enhance transparency and consistency for both private companies and credit investors. It will achieve this by providing a standard format for ESG-related disclosures.

In addition, the template offers private companies a baseline from which to develop their ESG reporting ability.

Furthermore, investors are enhanced by the tempalte to identify industry-specific ESG risks in their credit portfolios.

The template was created by the ESG IDP, which is led by the Alternative Credit Council (ACC), the private credit arm of the Alternative Investment Management Association (AIMA), the Loan Syndications and Trading Association (LSTA), and the UN-supported Principles for Responsible Investment (PRI).

Founding members of this initiative include Apollo Global Management and Oak Hill Advisors.

Jiri Krol, global head of the Alternative Credit Council, said: “SMEs and mid-market businesses require a more proportionate approach to ESG disclosure than large public corporates. By simplifying and harmonising 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. We look forward to working with our members and partners to support the widespread adoption of this disclosure template.”

Tess Virmani, executive VP and head of ESG at LSTA, said: “Investors and regulators have made it clear that the status quo is untenable, and the credit market recognizes the need for harmonized ESG reporting. We are delighted to officially launch this resource – harmonization is the critical next step in improving the availability of consistent, reliable ESG information and furthering the responsible growth of ESG in credit markets.”

Carmen Nuzzo, Head of Fixed Income at the PRI, stated: “Taking the cue from the PRI’s ESG Factor Map, which pointed out the substantial overlapping of many competing ESG standards and frameworks, this new template will allow private creditors to have a ‘bigger voice’ during the investment process. It will streamline ESG information collection, whilst providing opportunities for meaningful conversations with borrowers. Its success now requires adoption, which we strongly urge, together with the other ESG IDP supporters.”

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