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Good morning from Davos.
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I'm Tawfik Hammoud, BCG's Chief Client Officer
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and I'm here with Meg Starr,
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the Global Head of Impact at Carlyle.
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And we're here to talk about
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an incredibly exciting initiative for our industry
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the ESG Data Convergence Project.
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Meg, very excited to have you.
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Thanks for having me.
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So tell us a little bit about
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Carlyle's involvement in the project.
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So the ESG Data Convergence Project
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really kicked off last summer
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and it was a group of GPs and LPs that came together
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to address a challenge that we were all facing.
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We all have the same end objective.
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We want a smaller set of more meaningful,
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quantitative, performance-based data on ESG,
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but we have been running in
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a thousand different directions to get that.
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GPs are inundated with ESG data requests from LPs.
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LPs similarly, look across their underlying portfolio
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and can't see a single ESG data point
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that they can measure in the same way.
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And so the basic thesis was let's sit in a room
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and negotiate and agree on even a small set
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of ESG data points that will all measure in the same way,
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the same definition, at the same time of year,
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the same financial normalization metrics.
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So we can actually start using that ESG data.
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That's terrific.
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And for those of you who are not like Meg and I,
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well-versed in private equity,
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GPs are general partners who are deploying the capital.
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LPs are the actual providers of the capital,
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the pension plans, the sovereign wealth funds,
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and the family offices.
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Tell me a little bit more specifically
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what Carlyle's role is in it.
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So we gathered a group of our fellow private equity firms
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and then a bunch of our large global investors.
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And we started with where we had overlap.
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And so there were actually six categories of metrics
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that we were all already collecting ESG data.
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We just had slightly different ways of collecting it.
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And so we sat in a Zoom room over many months and said,
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okay, how do you think about greenhouse gas emissions?
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How do we collect them?
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Let's agree on one definition.
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So the private equity firms,
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we all agreed to change our data collection systems
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and we get that data from
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our underlying portfolio companies.
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And the way we use it is twofold.
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First, we give it directly to our investors
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when they ask for it so that they can see
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our data next to another private equity firm's data
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next to another private equity firm's data.
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And the second piece, which I think
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is the most exciting piece for the industry is that
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every private equity firm has agreed to anonymize our data
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and aggregate it centrally.
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And BCG has been our partner in actually aggregating that
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into the first private market benchmark for ESG data,
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which is pretty incredible.
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It is incredible.
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I mean, it really is an industry-wide initiative
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that was badly needed.
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It's great to see so many private equity funds
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and providers of capital come together
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to provide transparency on what is arguably
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one of the most important, some would say,
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existential issues of the day.
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And we at BCG are super glad to be
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part of the project since day one.
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Do you feel the data transparency part,
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and the the quality of the data
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that we're starting to get,
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the quality of the insights that are coming back,
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is pretty good already?
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Yeah, we've actually been really surprised at the upside.
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So when we launched this in the fall of 2021,
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we said, hey, this is open source.
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If you're interested, come along with us.
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Any private equity firm, any investor
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can join it's open source.
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And since that time we've had more than
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180 private equity firms join.
That's incredible..180?
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And so we're actually,
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How many portfolio companies?
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So we're getting the data in right now.
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And we're a little north of
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1,700 private companies
That's amazing.
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in the benchmark.
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And the most important thing is,
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we're getting response rates of north of 80%
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for each of the underlying data points,
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which is a much higher level of coverage and quality
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than I think we were expecting in year one of the project.
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Thank you for joining us today.
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Thank you for sharing some great insights today.
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And I just wanted to say, what's next for the project?
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Well, we're aggregating the data right now
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from this first year and seeing what we've learned.
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But the exciting thing is we're about
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to start the sprint process
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which we plan to go through annually.
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Condensed process in the spring to say,
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what did we learn?
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What should we change?
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And are there any other metrics we should add to this?
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Because I think what we've built
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is we've built that convergence
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and we've built that critical mass
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of private equity firms and investors.
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And so, we're focused on how can we drive more convergence
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to get better, more meaningful ESG data
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across the investment landscape.
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And that can mean through private credit.
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That can mean through other stakeholders
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such as consultants,
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but we're really excited to have
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this first year go off with such a success.
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And we're looking forward to what comes next.
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Thank you for being here.
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I really appreciate it.