How Private Equity Investors Can Streamline ESG Data Collection

Important ESG initiatives are too often set back by the substantial inefficiencies in traditional ESG data collection workflows. For most private equity firms, collecting, compiling, and reporting ESG data is a cumbersome process, hampered by inaccuracies from disparate spreadsheets, email, and disjointed systems that offer limited visibility and data quality controls. Moreover, the resource-intense nature of manually managing ESG surveys across diverse portfolios and generating analysis to understand impact further limits the opportunity to leverage ESG insights within a holistic value creation strategy.

By adopting a flexible, cloud-based tool for ESG data collection, private equity investors can streamline survey configuration, automate recurring portfolio company requests, integrate ESG data alongside financial performance data, and ultimately free up resources to better analyze ESG initiatives’ impact on value creation.

Private Equity ESG Data Collection Workflow Challenges

Traditional template-based surveys — either in Excel or a portfolio monitoring tool — restrict configuration, limit collaboration, and create a clunky user experience.

Inefficient Data Compiling and Rigid Configuration

Conducting ESG surveys through Excel requires manual compilation of individual portfolio company responses into a centralized workbook, leading to data quality issues and significant inefficiencies. The inability to make questions or metrics mandatory also complicates enforcing data submission standards, often resulting in onerous communication with portfolio companies to close outstanding data gaps.

Further, ESG surveys involve a broad spectrum of data, ranging from diversity initiatives and cybersecurity policies to executive compensation and energy consumption metrics. Often, Excel and templates can’t accommodate the qualitative and quantitative formatting necessary to effectively collate this data in a scalable manner.

As ESG standards evolve, investors enter new sectors, or companies’ data needs change, private equity firms need the agility to adapt ESG surveys accordingly. However, incorporating new metrics, questions, or sections in most templates and Excel involves a complex configuration effort.

Understanding Impact Is Limited Due to Siloed Financial and ESG Data

Without a unified platform for collecting portfolio company financial, operational, and ESG data, private equity investors lack an efficient mechanism for assessing the impact of their ESG initiatives. For example, in Excel, investigating the relationship between ESG and financial performance or conducting fund or portfolio company trend analysis against ESG goals would require significant manual data compilation. As sustainability initiatives increasingly become additional levers within a value creation framework, conducting analysis in a vacuum may stunt returns.

Suboptimal Portfolio Company Experience

ESG surveys touch many departments within a portfolio company. Internally circulating a template or Excel workbook for stakeholders to fill out respective sections often leads to a time-consuming effort for portfolio companies.

Further, template or Excel-based ESG questionnaires can lack a user-friendly experience, require users to navigate sprawling Excel files, and lead to metric definition ambiguity — all of which distract portfolio companies from their true responsibility to grow the business.

How Private Equity Investors Can Improve ESG Data Collection

Private equity firms can use Chronograph to easily customize ESG questionnaires, centralize their process, improve efficiency, and provide an enhanced portfolio company experience. Further, consolidating ESG data with financial and operational data in a single source of truth significantly enhances firms’ analytics and reporting capabilities.

Flexible Survey Configuration Allows for Customization

Chronograph’s flexible, cloud-based data collection tool allows firms to customize their ESG surveys at the fund, sector, or portfolio company level without a time-intensive configuration effort. For example, users can easily create different survey permutations for biotech, SaaS, and retail or fully customize the surveys for certain companies. Additionally, they can add new sections or data items as needed, updating surveys in real-time with portfolio company growth, the evolution of ESG standards, or data accessibility from third-party data suppliers.

Further, a variety of field and metric formatting options enables teams to customize questions for specific data collection needs, which is particularly powerful for gathering qualitative ESG data.
For example, some qualitative configuration options include:

• Multi-select questions. Some ESG questions need to accommodate multiple responses. For example, portfolio companies might use multiple ESG frameworks or have a nuanced cadence at which they require cybersecurity training. Multi-select questions enable portfolio companies to choose all applicable responses in a drop-down menu, such as ‘SASB’ and ‘PRI,’ or ‘annually’ and ‘upon hire.’

• Tables. Table-like functionality provides a user-friendly way for portfolio companies to populate lists of ESG data, such as charitable contributions and board member information.

• Conditional questions. Conditional survey questions allow firms to gather additional information on topics relevant to certain portfolio companies. For instance, when the following question — ‘Were there any major product health and safety issues during the reporting period?’ — is answered “Yes,” additional questions can appear to better understand the incident.

• Long-form text fields. ESG responses that require detailed information, such as details on workplace training programs or harassment incidents, can be efficiently gathered using long-form text fields. This feature also allows investors to easily collect survey feedback, providing insights into portfolio company experiences that allow them to improve future questionnaire iterations.

Additionally, the ability to make fields mandatory for submission or require supporting documentation eliminates back-and-forth inefficiencies from prolonged communication with portfolio companies.

A Single Platform for Financial, Operational, and ESG Data Unlocks Better Analytics

A single tool that integrates all portfolio company data — ESG, operational, and financial — enables investors to easily create dashboards, visualizations, and analyses in a holistic manner, illuminating the true impact of sustainability initiatives on value creation and progress towards ESG goals at the fund or company level. For example, with all portfolio company information flowing through a consolidated platform, investors can seamlessly query data into downstream analyses, including:

• Examining the relationship between ESG KPIs — such as diversity metrics and employee turnover — on financial metrics like revenue.

• Tracking KPIs by sector, such as the number of workplace accidents among portfolio companies in retail or manufacturing.

• Performing sustainability analysis at the portfolio company level, such as understanding where CO2 emissions mitigation efforts might overlap with operational savings.

Centralized Interface Enhances the Portfolio Experience

Centralizing the ESG survey process in a user-friendly platform greatly streamlines the survey process for portfolio companies. Automatic alerts prompt the start of quarterly, semi-annual, or annual questionnaires, and internal admins can distribute survey sections to relevant stakeholders. By embedding contextual information and instructions within the survey, investors can also reduce confusion and align on data interpretation, improving collaboration, completion, and data quality. This is particularly useful for complex metrics — such as total energy consumption (KwH) — where providing a thorough definition and example helps ensure responses yield an accurate number.

Ultimately, when firms migrate their ESG data collection process to a flexible tool in the cloud, they can simplify survey configuration, provide portfolio companies with a better experience, and enhance their ESG analytics.

Request a demo to see how Chronograph can help you maximize value from your ESG data and custom-design ESG surveys at scale.