Jean Rogers, the new global head of ESG at Blackstone, will work to oversee strategy and reporting for over 250 portfolio companies. Here, she explains why second order data is the secret sauce…
Jean Rogers, the new global head of ESG at Blackstone, will work to oversee strategy and reporting for over 250 portfolio companies. Here, she explains why second order data is the secret sauce…
The sustainability veteran and founder of non-profit Sustainability Accounting Standards Board (SASB) joined Blackstone in January to take on one of the most important roles in the private markets.
Heads of ESG have been appointed at most of the large private equity houses and some smaller ones too. How much more hiring and team building do you see among GPs?
Jean: Yes, I do see it continuing. We have a hub and spoke model with a centralised team and people with specific expertise embedded into the business units such as private equity [and that works well]. The challenge is to have that central bird’s-eye view, supporting initiatives within these business units, gathering intelligence and bringing it back to understand what we are seeing, hearing, and what are emerging issues.
Can you describe some of the first conversations you had with Blackstone’s investors when you took on the role last year, and what you have taken on board?
Jean: The number one thing is decarbonisation – meeting net zero targets and what those transition pathways look like. We have been focused on energy efficiency and driving down emissions by 15 per cent in aggregate over the next three years for investments where we control the energy usage. We are increasingly looking at renewable energy procurement.
We also hear about greenwashing: for example, having 2050 [net zero] targets without a plan to get there. We view the antidote to this as having a very specific plan for achieving those targets and making sure that companies are accountable and measuring progress, for example through our portfolio-wide carbon footprint numbers.
As the levels of sustainable investment have increased globally, has it become difficult to deploy capital in the space?
Jean: Even with all the money that has been flowing into the public markets, we’re not seeing the type of impact that we would expect and we are seeing a realisation that perhaps products [in those markets] are not doing as much as they could. We are seeing a lot of opportunity in concentrated, active decarbonisation strategies. There is not a lot of competition in this space because it often involves going into industries and assets that typically have been viewed as un-investable.
How is ESG data helping you to do this?
Jean: Data has always been a challenge in the private markets because the assets are so diverse. Where I think the ESG frameworks and data have failed us is in that they are often focused on what I consider ‘first order’ metrics, for example carbon footprint or diversity metrics. What we need to assess is ‘second order’ data such as ‘what resources are you putting against this, what does your capex look like?’ That takes deep analysis and engagement with companies. Second order data is critical and you will see that this is the secret sauce.
But for smaller managers, maybe there is a challenge there, in terms of sourcing industry or asset specific data year in and year out. How do they navigate that?
Jean: We hear this from our smaller managers, but there’s a revolution happening now in the ESG data field being driven by AI. AI is interesting and wonderful because it creates structured data from unstructured data. You don’t have to wait five years or eight years for a standard to emerge, you just have to know what you’re looking for.
Investors all have their own thesis too, so I believe this field is going to completely move into being AI-led and driven, and smaller managers with will be able to participate. That changes a lot of things because actually now you’re writing your disclosures for bots, and not for people.
What do you expect to see from US regulators in the year ahead?
Jean: They have historically taken a lighter hand on fiscal policy [than the EU] – what I think is still evolving in the US is the understanding of whether we are trying to mitigate a systemic risk [as the EU is doing] or are still focused on idiosyncratic risks, which works well company by company. The fact that they’re beginning to write comment letters on climate change is positive.
Read the rest of the Private Equity Wire Insight Report: Creating Values: Behind the ESG Revolution in Private Equity
