Private equity credit team advances decarbonization measurement efforts with T-REX
As lenders in both private and public markets commit to sustainability goals, the future of financing must include ESG data measurement and related loan covenants. T-REX helps a private equity credit team manage this complexity with its Oil & Gas portfolio as it accelerates decarbonization efforts through precise measurement and analytics of deal data alongside ESG data.
Challenge:
A private equity firm with decarbonization commitments aimed to streamline its fragmented approach for collecting and reporting ESG data, and further, hoped to analyze the ESG data alongside traditional financial data at the asset and portfolio levels. However, borrowers submitted ESG data to the credit team infrequently and in inconsistent formats, making it difficult to conduct analysis holistically.
Solution:
The firm leverages T-REX’s Analytics & Insights Platform, Managed Data Services, and asset servicing to establish ESG-inclusive finance practices, initially in its Oil & Gas portfolio, with a roadmap to onboarding other asset classes.
T-REX Managed Data Services onboards credit data and ingests ESG data from borrowers and their data collection partners, with a focus on GHG emissions monitoring. This produces an environment on the T-REX Platform in which credit facilities can be analyzed and stress tested for financial performance at the asset and portfolio levels and monitored for GHG emissions-related covenant breaches.
With near real-time monitoring of emissions-related covenants, the credit team will be able to dynamically price facilities, offering bonuses or penalties based on performance.
Reporting takes place on T-REX in dashboards inclusive of its Oil & Gas borrowers’ Scope 1 and 2 emissions data and operational details, financial data, and 3rd party industry data. Custom reporting is available in various accounting standards for inclusion in firm-wide reporting.
Outcome:
Since onboarding the credit portfolio and ESG data onto T-REX, the borrowers’ GHG emissions data has been automatically reported real-time, rather than in annual submissions, and is now used in benchmarking and for monitoring GHG emissions-related covenants.
This practice will enhance climate impact measurement capabilities, improving lending decisions and accelerating decarbonization efforts. Further, it will enable greater transparency and more comparable portfolio information for limited partners.