Why does it matter?
Better-informed investment decisions
We believe that transparency on material ESG (environmental, social and governance)-related risks and opportunities, such as those posed by climate change, is important to fully consider the risk-return characteristics of investments and as such can better inform decision-making of investors. That is why we have supported the TCFD since 2019, and in 2022 formally expressed our support for the Taskforce on Nature-related Financial Disclosures (TNFD) by becoming a member of the TNFD Forum.
The role of regulation – standardisation
Financial market regulators around the world have understood the importance of standardised, minimum ESG disclosures for preventing greenwashing. The EU Sustainable Finance Disclosure Regulation (SFDR), which came into effect in March 2021, is a prime example of such a regulation in our industry. As the US Securities Exchange Commission, the UK Financial Conduct Authority and other regulators globally are contemplating ESG disclosure and/or labelling regimes in their markets, we urge for suitable harmonisation and proportionate and practical implementation in private markets, to ensure a truly levelled playing field.
To support this, in 2022, we collaborated with peers at Initiative Climate International and BVCA to collectively respond to the UK FCA consultations on Climate Disclosures for Asset Managers (finalised) and Sustainable Disclosure Regulation (pending); and with fellow members of Invest Europe to respond to further consultations by the European Commission on the implementation of SFDR.
We seek to provide regular updates to our clients and other stakeholders on how ESG considerations are integrated into our investment decisions and processes; and the outcomes we have achieved. We do this at firm level and for individual funds, depending on the purpose of disclosure and nature of underlying information.
As a listed company and a regulated asset manager, ICG seeks to provide timely and detailed reporting on relevant ESG matters through its own annual disclosures and by participating in voluntary assessments.
Recognising the importance of climate disclosures, ICG has been reporting voluntarily against the TCFD recommendations since 2019. Building on this, as part of its Annual Report for FY22, ICG plc produced its first mandatory climate disclosures in line with the recommendations of the TCFD to respond to the requirements for premium listed companies in the UK.
Sustainability & People Reports
Our first firm-level ESG report was produced in 2014, and the focus, breadth and depth of this report have considerably expanded ever since. For its 2021 Sustainability & People Report, ICG further enhanced its approach by drawing on relevant GRI & SASB standards.
UK FCA Stewardship Code
ICG was admitted as a signatory to the UK FCA Stewardship Code in March 2022 and has an obligation to provide an annual update on progress on its stewardship activities.
Responding to key regulatory developments
The EU Sustainable Finance Disclosure Regulation has been one of the most substantive disclosure regimes that covers our investment activities. Since March 2021, for each fund in scope of the SFDR, we have prepared and provided to investors:
- pre-contractual disclosures, specifying the promoted environmental and/or social characteristics or the pursued sustainable objectives by each fund, as relevant and applicable.
- periodic disclosures, communicating the extent of attainment of the promoted environmental and/or social characteristics or pursued sustainable objectives by each fund, as relevant and applicable.
Promoting best practice, beyond regulation
In 2022, after listening to our clients’ needs, and exploring best practices from peers, we developed a harmonised, modular approach to fund-level ESG reporting across the firm. This approach was first implemented to one Direct Lending fund (Senior Debt Partners 4) and select liquid credit funds. All of these reports incorporated a presentation of ESG Risk Ratings distribution across the portfolio, based on ICG’s proprietary methodology which we rolled out across our Private Debt, and Credit asset classes at the end of 2021.
We also continued to enhance the dedicated fund-level ESG reporting to investors in our European Corporate funds (first issued in 2019) and Infrastructure Equity fund (first issued in 2021).
In the past year, we also incorporated the TCFD- recommended portfolio climate metrics as standard in our fund- level ESG reporting. Disclosure of greenhouse gas emissions data by private companies is still nascent, so for any gaps in actual data we utilise proxy data modelled by a reputable external data provider.
Data integration for ESG assessment and reporting
At the start of 2022, ICG began implementing a dedicated web-based ESG data management solution to enable more efficient data collection, analysis and reporting for our portfolios, in line with ICG’s wider efforts to build digital resilience across the firm.