As private markets grow, so does demand for related data and information services. This report looks at a small but growing area that stands to benefit from this trend: ESG solutions for private markets. While ESG data and research has long centered on public markets, it has recently spilled over into this growing segment.
Offerings are still nascent, and demand has largely been driven by regulatory developments and industry initiatives. Opimas estimates that spending on ESG solutions for private markets sat at roughly US$45 million in 2022 – a small fraction of the US$1.3 billion global ESG data market. However, this new segment is growing at quite a fast pace, with a CAGR of 42%.
Opimas has identified 15 vendors offering an ESG solution for private markets, which can be grouped into three categories:
- Tool for self-collection: A software solution that can be licensed by the investor to collect relevant information from their portfolio companies. This category includes IHS Markit (now part of S&P Global), ISS, and Novata.
- Database of information: ESG data is collected and stored by the data vendor and offered as a single data package. Seven firms offer this type of solution: CDP, Clarity AI, FactSet, Moody's, Preqin, S&P, and Sustainalytics.
- On-demand evaluation: Provided in response to investor demand, this service produces portfolio- or company-level ESG reports. APEX Group, EcoVadis, ERM, EthiFinance, and Metric offer this type of solution.
N.B.: The above list is not exclusive. Other vendors of ESG solutions - including Refinitiv and RepRisk - also cover private companies in addition to publicly-traded companies.
Although private markets investors face various challenges when it comes to assessing the ESG risks associated with their portfolio holdings, these challenges also present opportunities for vendors of ESG solutions.