Expanding ESG Transparency in Private Markets

This technical report discusses the importance of assessing ESG-related controversies in private markets, particularly focusing on the Morningstar PitchBook Unicorn 30 Index, which tracks large, late-stage private companies. The report outlines the current low severity of controversies among these companies but highlights meaningful underlying issue exposure, suggesting that ESG risk may be limited by insufficient disclosure. It details the clustering of controversies around Quality and Safety, Data Privacy, and Intellectual Property, reflecting risks typical of digital and AI-driven business models. The report compares the Unicorn 30 with public software companies, noting differences in Intellectual Property exposure and the underrepresentation of Anti-Competitive Practices incidents. Additionally, it emphasizes the significance of governance structures for companies seeking IPOs, using SpaceX and Tesla as case studies. The report concludes that gaining visibility into controversies within the private unicorn universe is essential for investors aiming for consistent risk management across private and public markets.