ESG and private equity: what funds ask of their portfolio companies
If a private equity fund takes a stake in your company, requests for ESG data will follow. Here is what it asks for, why, what changes with SFDR 2.0 and how to prepare without chasing questionnaires.
Private equity funds ask their portfolio companies for measurable ESG data: greenhouse gas emissions, energy, waste, workplace safety, diversity and governance. They do so because the European SFDR regulation requires them to report these indicators to their own investors, and because the data affects the company’s value at the time of sale. The SFDR 2.0 reform, still under negotiation in October 2026, will change fund labels but will not make the requests go away.
Why funds ask for ESG data
A private equity fund raises capital from institutional investors, such as pension funds, insurers and foundations, and invests it in unlisted companies. Those investors ask the fund to demonstrate how it manages ESG risks and impacts. The fund, in turn, passes the questions on to the companies it owns.
There are three reasons, and they usually add up:
- regulatory obligations: in Europe, managers must publish sustainability information on their products under the SFDR regulation;
- investor requests: many institutional investors ask every year for a set of standard indicators across the whole portfolio;
- value at exit: whoever buys the company from the fund will carry out ESG due diligence, and well-organised data reduces price discounts and negotiation time.
SFDR: the rules in force in 2026
Regulation (EU) 2019/2088, known as the SFDR, has applied since 10 March 2021 to fund managers and other financial market participants. In practice it has divided funds into three groups: Article 6 funds, with no declared sustainability characteristics; Article 8 funds, which promote environmental or social characteristics; and Article 9 funds, which have a sustainable investment objective.
For portfolio companies the most concrete point is principal adverse impacts (PAI). Delegated Regulation (EU) 2022/1288 lists the mandatory indicators for investments in companies. Here they are, grouped:
| Topic | PAI indicators for investee companies |
|---|---|
| Climate | Scope 1, 2 and 3 greenhouse gas emissions, carbon footprint, emissions intensity, exposure to fossil fuels |
| Energy | Share of non-renewable energy consumed and produced, energy intensity in high climate impact sectors |
| Nature | Activities in biodiversity-sensitive areas, emissions to water, hazardous and radioactive waste |
| Social and governance | Violations of the UN Global Compact principles and the OECD Guidelines, lack of compliance processes, unadjusted gender pay gap, board gender diversity, controversial weapons |
Many of these indicators are not published by unlisted companies. That is why the fund asks you for them directly, often through an annual questionnaire. If emissions seem the hardest part, start with our guide to Scope 1, 2 and 3 with examples.
SFDR 2.0: what the Commission proposes and where it stands
On 20 November 2025 the European Commission proposed a far-reaching revision of the SFDR. The underlying idea is that Articles 8 and 9 have been used as market labels, without clear criteria. The proposal replaces them with three voluntary product categories, each with minimum criteria:
- sustainable, for products investing in activities that are already sustainable;
- transition, for products financing companies and projects on an improvement pathway;
- ESG basics, for products that integrate ESG factors without the requirements of the first two.
For all categories the proposal requires at least 70% of investments to be consistent with the declared strategy. It also removes the obligation to publish the principal adverse impacts statement at manager level, to reduce overlaps with the CSRD.
As of October 2026 the text is not yet law. The Council adopted its negotiating position in June 2026, while the European Parliament completed the ECON committee stage in September. The final negotiation between the institutions remains. The new rules are expected to apply only after a transition period, so not before the end of 2028. One of the open issues is precisely how many PAI indicators will remain mandatory in the new categories.
For your company the conclusion is practical: even with SFDR 2.0 the fund will have to prove with data that its investments meet the criteria of the chosen category. The questions on emissions, energy and governance remain.
What they ask you, stage by stage
The requests change over the life of the investment. Knowing what is coming and when lets you prepare in good time:
| Stage | What the fund asks for | What it pays to have ready |
|---|---|---|
| Due diligence before entry | Environmental, social and governance risks, litigation, permits, waste management | Environmental permits, waste registers, policies, data on injuries and workforce |
| First months after entry | ESG action plan with priorities and owners, often within the 100-day plan | A baseline of consumption and emissions, an internal point of contact |
| Annual monitoring | Questionnaire with standard KPIs, often with deadlines in the first quarter | Previous year’s data on energy, emissions, workforce and governance, with sources |
| Exit | The buyer’s ESG due diligence, sometimes a vendor-prepared report | Historical series of indicators, evidence of improvements, sustainability report |
The annual questionnaire is the most demanding moment, because it arrives together with the financial year-end close. The same questions are also very similar to those in bank ESG questionnaires: it pays to answer only once, from a single database.
The most requested KPIs: the EDCI metrics
To avoid every fund using a different questionnaire, the ESG Data Convergence Initiative (EDCI) has spread across private equity. It brings together more than 400 managers and investors, and the data collected feeds an anonymised benchmark produced by Boston Consulting Group. The core metrics are:
- greenhouse gas emissions Scope 1 and 2, with Scope 3 optional;
- decarbonisation, i.e. whether there are reduction targets, for example validated by the SBTi;
- renewable energy as a share of total consumption;
- diversity on the board and in management;
- workplace injuries, days lost and fatalities;
- net new hires and turnover;
- employee engagement, for example whether internal surveys are carried out;
- cybersecurity, the most recently added area.
The calendar matters: participating managers must complete the collection of 2026 data by 30 April 2027. In practice, your fund will ask you for the figures for the year just closed between January and March.
How to prepare the company
You do not need a dedicated team to respond well. You need a repeatable method:
- A single database. Collect energy, fuel, waste, workforce and governance data once, and use the same figures for the fund, banks and clients. You will find a practical method in how to collect and manage ESG data.
- A recognised standard. The VSME was created partly to meet requests from investors and banks: the Commission Recommendation of 30 July 2025 invites anyone requesting data from SMEs to base their requests on this standard.
- Documented calculations. Emissions must be calculated with the GHG Protocol, stating emission factors and sources. A number without a method does not survive due diligence.
- A point of contact and a calendar. Decide who collects the data and when, starting from the fund’s deadlines.
- Realistic targets. The fund also looks at improvements over time: a reduction plan with a few concrete actions is worth more than many promises.
With Envify you can prepare this data set starting from utility bills, invoices and waste forms, and generate a VSME report to share with the fund and reuse for other requests.
Private equity funds ask for ESG data because the SFDR requires them to report it and because it affects value at exit. The SFDR 2.0 reform is still under negotiation and will not apply before the end of 2028, but it will not eliminate the requests. Prepare a single database, calculated with recognised methods such as the VSME and the GHG Protocol, and use it for the fund, banks and clients.
