A Nordic perspective: Leveraging ESG software for Private Equity

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By Timothy Buckby, Director | Advisory Sustainable Investments at Position Green

Increasing demand for sustainability transparency from limited partners and ever-expanding ESG regulations have sharpened investor focus on ESG in private markets. In the Nordics, choosing the right ESG software for private equity, venture capital and other investment firms is crucial in supporting both investors and relevant stakeholders alike.

Nordic players are not only focused on data collection during ownership of an investment, but are also seeking comprehensive software solutions that provide full ESG management systems throughout the entire investment cycle.

Strong integration of ESG in private markets

The integration of environmental, social and governance (ESG) factors into investment decisions has gained significant traction in the finance industry. Access to robust ESG data has become a priority and a challenge for Nordic organizations. By capturing data at a pre-investment stage, there is a longer timeframe to work with data and embed ESG-related risks in your action plans. 

How do I choose the best ESG private equity software?

Recently, transparency and accountability are becoming baseline expectations in the Nordic market. The realization of efficient ESG software enables private investment firms to manage their processes, back up their commitments with actions, and provide transparency into the ESG performance of their portfolio companies.

Things to consider when choosing ESG private equity software that suits your needs:

How does this software enable data collection and validation?

ESG software suited towards private markets will allow to collect ESG data from the portfolio through surveys, spreadsheets or API connections with other systems, where embedded validations, frequency selection and traceability help you quality-assure the process. Streamlined data collection aligned with the maturity level of portfolio companies will also allow for flexible and compliance-ready reporting structures. 

Will the software simplify reporting?

Choosing a software with built-in reporting frameworks, disclosures and best practices will help ensure compliance with evolving ESG regulations and structure data collection according to relevant industry standards and legislations. It is possible to translate an ESG strategy into a streamlined reporting structure, including what aspects, KPIs, and investments to be assessed in relation to your ESG goals and material focus area.

Will the software help evaluate companies before investing?

By implementing ESG software that incorporates a pre-investment solution, you can screen and conduct ESG due diligence to identify potential ESG opportunities, impacts and risks before investing.

Choose ESG software that provides an analytical framework tailored to the priorities of the business, its industry, and assurance that potential investments align with coming regulations and disclosures. The data-driven insights gained can be used for negotiations and post-closing action plans.

Does the software enable me to monitor my investment’s sustainability performance?

A key feature of good ESG private equity software is the ability to monitor your investment’s sustainability performance and work proactively with investor reporting, risk and impact assessment on all levels. 

Will the software provide relevant, insightful guidance?

We have seen that  investors in the Nordics are starting to request full-cycle investment software. Their requests to provide transparency, not only ensure qualitative data and insights from all organizational levels and entities, it also helps identify potential ESG-related risks and opportunities to increase sustainable value creation.