DB and DC trustees must hold private market managers to account for lack of climate data reporting progress

Availability of climate data from private markets remained patchy in 2023, shows research from Hymans Robertson. This leaves DB and DC asset owners with gaps in their decision-making process and at risk of seeing their own climate reports failing to meet regulatory standards, warns the leading pensions and financial services consultancy. Trustees who have set strong data quality objectives need their asset managers to respond. Whilst TCFD has driven improvements in disclosure, asset owners’ climate goals can only be supported by ongoing improvements in data gathering and reporting, it adds.

The research, which is carried out annually, assessed the extent to which private market asset managers are able to report on climate metrics across four asset classes: private debt, private equity, real estate and infrastructure. In 2023 asset managers reported on assets totalling £93.9bn, compared to £63.9bn in 2022. The most significant improvements were seen in the amount of data provided by private debt managers. Response rates increased to 43% from 21% in 2022 and emissions data (26%) was reported for the first time. However, reporting rates across other asset classes demonstrated no material change over the year. The response rate for infrastructure managers fell to 67% from 75% in 2022. The rate of reply from property managers fell to 47% from 60% in 2022. The lower response rate from managers reporting on property assets meant that there was less data provided on carbon emissions, with only two thirds (62%) of property funds providing this data.

Commenting on the need for Private Markets Managers to ensure they are continually improving their climate reporting, Simon Jones, Partner, Head of Responsible Investment, Hymans Robertson said:

“Reporting on climate data remains at a relatively early stage across most private market asset classes. However, for asset owners who have set climate goals, there is a need to understand the progress that is being made. Better data helps not just the reporting needs of asset owners, but it also informs their strategic decision making. This is one of the reasons why we have advocated for the adoption of data quality objectives by asset owners within the TCFD frameworks.

“Our research shows that there have been some improvements in reporting, particularly within Private Debt strategies, but we’ve seen little progress across other asset classes. We recognise that change takes time and that continued engagement with asset managers is the way by which we and our clients can help improve disclosures. Although reporting should not be at all costs, we prefer managers to disclose the information they have available and the reasons why there are gaps, rather than simply say nothing.”

To support investors to get the information they need for decision-making, reporting and governance requirements, the report highlights five recommendations for asset owners:

• Continue to ask for data: Asset owners can drive change by making consistent requests for information.

• Engage with managers: It’s important for asset owners to assess their managers’ internal processes for data collection across private market assets. Where data is not being reported, asset owners should understand the actions being taken to begin reporting, with engagement being used to emphasise data requests.

• Understand data verification processes: Managers should be asked to explain how reported data has been tested. This will help to ensure accuracy and can give confidence in the approach followed. 

• Be pragmatic: There may be some assets for which data collection is impractical or uneconomic. Understanding where asset managers are not pushing for data and why is vital. 

• Encourage transparency: It is more beneficial for managers to report on some metrics rather than not reporting at all because they have some gaps. Managers must be urged to assess both the relative significance of data gaps, and the actions that they are taking to ensure that climate risks are being managed effectively.

A copy of the research can be found here.