Last month, team T-REX attended DealCatalyst and LSTA’s Private Credit Industry Conference on Direct Lending and Middle Market Finance. While the conference boasted an impressive array of panels highlighting where the future of private credit is headed, one of the highlights was Metrics and Reporting Templates for ESG Disclosure and Benchmarking in Private Credit which featured T-REX CEO, Benjamin Cohen, as a panelist.
T-REX has a long history in the sustainable finance space and strong support for ESG analytics and reporting alongside financial data. This feature has been expanded recently thanks to the integration with Xpansiv’s UPN system, which provides immutable ESG data, and creates a connection from the point of finance through to the leading ESG registries and markets. Altogether, this gives T-REX, and Benjamin, a unique perspective on the future of ESG within the private credit market and how current tech solutions are evolving to meet changing needs.
Panel Recap – The Future of ESG Reporting in Private Credit
Beyond Benjamin, the panel also featured experts from Evergood and Pemberton, each of which has specific ties to the ESG industry. The panel was moderated by Swami Venkataraman who serves as the Associate Managing Director of ESG for Moody’s.
The panel kicked off with an evaluation of current ESG reporting standards in the U.S. Unsurprisingly, the panelists agreed that the EU has made far greater strides in standardizing this type of reporting than the U.S., placing a higher onus on U.S.-based companies to follow in its footsteps and start providing improved, standardized ESG reporting as soon as possible. Panelists pointed out that ESG-driven investments have been shown to provide quantifiably better returns, both fiscally and to the betterment of society.
Furthermore, the panelists agreed that current regulations are relatively minimal and provide little direction or standardization. Therefore, investors find difficulty in asking for specific ESG metrics. In addition, ESG reporting still varies drastically by industry and business. Different organizations are interested in varied metrics and in order to comply with investor demands, issuers are often forced to create their own reporting methods and templates. Taken together, this means there is a lack of consistency across the entire ESG ecosystem, most of all across privately funded initiatives.
How Can We Spur Change?
The panel noted that much of the ESG regulation in the U.S. has been heavily tied to politics, delaying its progress. Couple that with the lack of standardization, and many companies are able to greenwash their initiatives without accountability to make actual changes. It is up to investors and issuers to spur the change and then trickle these changes into the larger ecosystem.
Fundamentally, it requires an entire shift in philosophy. Issuers themselves must be good stewards of capital and start accounting for the positive initiatives they’re fueling. Investors in turn need to understand that they have a right to this type of data and they should be requiring borrowers to provide it.
T-REX and Sustainable Finance
The adoption of data management practices and software to track the ESG impact of investments will be paramount to sustainable finance. As regulations change, frequent, standardized data, and systems to produce automated analytics and reporting, will ensure private credit teams can comply with the demands of sustainable finance and the future of investing.
Learn more about T-REX for Sustainable Finance and our recent integration with the Xpansiv UPN, both of which are making ESG reporting easier to manage and automate.