March 30, 2022 - It is with pleasure that the LSTA announces a new ESG project that will see the LSTA join forces with the Alternative Credit Council and PRI to harmonize ESG reporting by borrowers across credit markets.

This project builds on the success of the LSTA’s ESG Diligence Questionnaire (DDQ) for Borrowers which has been broadly adopted in loan transactions. That DDQ is designed to solicit a baseline of ESG information and is currently used as both a starting point for discussions with borrowers as well as a means of reporting. What has become clear since the DDQ was first launched in February 2020 is that asset owners and asset managers are becoming more sophisticated and more insistent when it comes to ESG demands. For instance, climate reporting, including quantitative data on greenhouse gas emissions, has been an area of keen focus. Indeed, the LSTA’s DDQ was updated in June 2021 to include a set of questions on how a company measures and manages its carbon footprint.

Looking ahead, due to incoming regulatory requirements and investors’ desire for quantitative information, companies will need to be prepared to report more ESG information. Moreover, managers and investors will need to be certain that they are receiving reliable, comparable information. It is only through the collaboration of industry partners and various loan market stakeholders that significant improvement will be seen. The harmonization project launched today takes the first step in this collaboration. This project will align lenders and private equity sponsors to support material and consistent ESG data disclosure. Through developing a harmonized ESG reporting tool for borrowers, lenders will be able to receive consistent data from sponsored and non-sponsored borrowers across the private and broadly syndicated credit markets. For borrowers, the move to a standard set of ESG reporting will bring efficiency to the reporting process and allow borrowers to concentrate on more robust reporting rather than the completion of a multitude of similar questionnaires.

This harmonization project is ambitious and the LSTA, ACC and PRI invite more organizations to join this endeavor to promote long-desired industry convergence in company reporting.

For more information, please contact Tess Virmani.