SENNA

Demand for Private Equity Data Seen Persisting Despite Regulatory Changes

Private equity firms and their investors expect demand for detailed portfolio company data to continue, even as new regulatory requirements reshape the industry.

The so-called PAI (Private Assets Indicators) metrics, developed by the industry body Invest Europe, are tipped to become an "informal standard" for investment and stewardship decisions, according to investors and data providers interviewed by Responsible Investor.

The PAI framework provides a common set of environmental, social and governance (ESG) metrics that private equity firms can use to track and report on the performance of their portfolio companies. While not mandatory, the indicators have been widely adopted by the industry in recent years.

"The PAI data is becoming a de facto standard that investors are asking for, even if it's not a formal regulation," said the head of ESG at a leading European asset manager. "Firms are using it to demonstrate how they're managing ESG risks and opportunities in their portfolios."

This demand is expected to persist even as the EU's Sustainable Finance Disclosure Regulation (SFDR) comes into force, which will require private equity firms to provide more detailed sustainability reporting. Industry participants say the PAI metrics could serve as a useful framework for firms to fulfill these new regulatory requirements.

"The PAI data gives investors a consistent way to evaluate and compare ESG performance across different private equity funds," noted the chief sustainability officer at a top-tier private equity firm. "It's become an important tool, and I think we'll continue to see strong demand for it going forward."

Some data providers are already positioning the PAI framework as a solution to help private equity firms navigate the evolving regulatory landscape. "We're seeing increased interest from clients in using the PAI indicators as part of their SFDR reporting," said the head of ESG solutions at a major financial data and analytics firm.

Analysts say the widespread adoption of the PAI metrics underscores the growing importance of ESG considerations in private markets. As investors place greater emphasis on sustainable investing, fund managers are under pressure to demonstrate the environmental and social impact of their portfolio companies.

"Private equity firms recognize that they need robust ESG data to satisfy investor demands and meet emerging regulatory requirements," said the senior market analyst at a global research firm. "The PAI framework provides a credible, industry-backed approach to fulfilling those needs."