Demand for information on how companies meet ESG (environment, social and governance) goals is growing, in part due to regulatory disclosure requirements in Europe and proposed SEC rules in the U.S. Although these rules currently only apply to publicly traded companies, investors in private companies are also increasingly interested in knowing how their portfolio companies’ ESG scores compare to the broader market.
To meet this demand, La Jolla-based Malk Partners – a leading advisor in ESG management and impact investing – announced last month it had entered into a strategic partnership with Integrum ESG – a London-based provider of ESG data, scoring, and benchmarking – to create a best-in-class ESG solution for private market investment firms.
“Our clients have been very clear. They want the best ESG data available – by which they mean, ESG data that is not only accurate, but customizable, easily captured, intuitively displayed, scored, and benchmarked against industry peers, and consistent with commonly-used ESG frameworks. In Integrum, we have found the innovative partner that best aligns to our clients’ needs,” said Max Hong, CEO of Malk Partners. “Combining the capabilities of Malk and Integrum will enhance private investors’ ability to drive ESG performance and overall value creation.”
AI-Driven ESG Data
Integrum’s use of advanced computing and automated data collection gives Malk clients a differentiated solution to knowing the ESG score of a company through its use of AI-driven data collection that uses very little human interaction.
“Integrum has built our data and platform as a service that helps asset managers and other financial firms analyze their ESG risks and impact,” said Shai Hill, CEO and founder of Integrum ESG. “Our proprietary AI models leverage vast amounts of data into the most robust ESG scoring and benchmarking available. By combining Malk’s preeminent advisory services with our industry-leading repository of public and private company ESG data, we can become even more valuable to our clients.”
One way in which Integrum’s automated data collection will add value for Malk clients is through added transparency. Hong said Integrum’s data collection and scoring method is “transparent, AI-driven and the methodology is very clear.”
“The way they score for public companies is exactly the same methodology of how private companies should be scored as well,” he added.
In addition to a transparent process, the strategic partnership with Integrum also gives Malk’s clients a clear way to look at how their portfolio companies compare to companies in the broader market. Integrum has a database of over 4,500 public companies that can be evaluated alongside Malk’s database of several thousand.
“We think it’s now the largest public and private database. You can now take a private company’s ESG performance and benchmark it against companies in their industry so it’s more of an apples to apples scoring and benchmarking, which doesn’t really exist in the market today,” Hong said.” Now, when a GP is going to talk to the limited partners and do an annual report, it’s very data driven. We’re an objective firm that provides an objective benchmark and rating.”
‘Perfect Setup for Driving ESG’
Investors are increasingly interested in objective ESG ratings for private companies, even though they are not yet required. But because of new regulatory rules on ESG disclosure for public companies, there has been a “pull” on private companies to meet ESG requirements – especially as they prepare for potential IPOs, Hong said.
“We’re starting to see a lot of investment banks come to us and investors come to us, even companies come to us, saying, ‘Hey we’re going to go public and there are all these requirements and regulations now around ESG. We need to build that capability, so help us do that,’” he added.
Hong said Malk Partners founder Andrew Malk launched the firm on the very premise that private investors are in a position to push ESG goals in the business community. “The degree of influence of private investors in a buyout situation makes a perfect setup for driving ESG within those companies.”
Since its founding in 2009, Malk’s business has grown to now advising companies with over $1 trillion in assets under management. The firm is still growing rapidly and is currently looking to hire, and especially “tap into the local talent in San Diego,” Hong said.
Hong, who took over as CEO in May of last year, also sees Malk’s role in the ESG space evolving into a “one-stop shop” with services for investors and businesses varying across consulting, data and advising.
Another growth opportunity for Malk, he said, is in “democratizing” access to the firm’s capabilities and knowledge by building out a platform solution based on the most common questions and concerns of investors.
“There are a lot of investors we don’t touch today because we don’t have that many people, but I think there’s a way to expand our reach through creating products and solutions businesses,” Hong said.
With the new partnership with Integrum, Malk also sees a path to growing into the top ESG rating company.
“Imagine how Moody’s does a corporate credit rating, or Equifax does consumer credit rating. At Malk we envision to be that. If Malk scores you on ESG as an A-minus it really means something,” he said.
CEO: Max Hong
Headquarters: La Jolla
Business: ESG management and impact investing
Notable: Malk Partners advises companies with over $1 trillion in assets under management.