Spotlight on environmental, social & governance risks plus opportunities

When the fifth Private Equity International Responsible Investment Forum takes place on 19 June 2014 in London, the event will put the spotlight on environmental, social and governance risks and opportunities in private equity investing, including a three-year initiative to increase levels of responsible investment around the world has been kicked off by a group of 11 major institutional investment institutions and a new Environmental, Social and Corporate Governance (ESG) Disclosure Framework for Private Equity.

Report from PRI:

The fifth Private Equity International Responsible Investment Forum takes place on 19 June 2014 in London. Building on the success of the previous events in London, New York and Amsterdam, the event will put the spotlight on environmental, social and governance risks and opportunities in private equity investing.

The PRI is once again co-hosting the event with Private Equity International. As global investor interest in ESG issues continues to gather pace, we will be bringing the world’s leading LPs, fund managers and specialists together to discuss where the next big opportunities lie in understanding and communicating the value that proper ESG management can deliver.

Preliminary speakers have been announced, including Jim Coulter of TPG as the keynote speaker.

Three-year project aims to boost responsible investment

A three-year initiative to increase levels of responsible investment around the world has been kicked off by a group of 11 major institutional investment institutions.

The institutions, under the banner of the Investment Leaders Group (ILG), have published a scoping document that outlines how the project needs to ‘shift the investment chain towards responsible investment’.

The report, which has been produced in conjunction with the University of Cambridge Programme for Sustainability Leadership, concludes that it is ‘absolutely necessary’ to reintroduce long-term considerations into investment decisions around the globe, and that so far efforts to do so ‘have been underwhelming’.

It adds: ‘Despite tremendous exertion and despite the thousands of signatories committed to the PRI, market dynamics remain pre-occupied by the short-term, and investment does little to answer the challenges of our time.’

The 11 institutions, who include Natixis Asset Management, Allianz Global Investors and Zurich Insurance Group, say they have a responsibility ‘to lead by example’ and that ‘a group that is small in number can climb higher and go further’ than larger alliances of investors.

Philippe Zaouati, chair of the ILG, said: ‘In spite of a widespread rhetorical commitment to responsible investment principles, market dynamics remain reoccupied by the short-term, and the majority of investment does little to answer the challenges of our time. The ILG will seek to change this, first of all by defining the value of responsible investment and then working out how to promote it.’ The ILG says publication of the scoping report, titled The Value of Responsible Investment, ‘is a first step towards that aim’.

Among other things, the report says investors should commission targeted research on the degree to which the risks generated by environmental ‘megatrends’ are limiting future returns and should start to ‘scale up’ capital allocation into technology, infrastructure and new businesses in the low carbon field.

ESG Disclosure Framework for Private Equity

Following a 16 month consultation and drafting process that involved a group of more than 40 limited partners (LP), 20 industry associations (including the PRI Initiative) and 10 leading general partners (GP), a new Environmental, Social and Corporate Governance (ESG) Disclosure Framework for Private Equity has been published on 25 March 2013.

The ESG Disclosure Framework has been developed to help GPs better understand why LPs want ESG-related information and to help rationalise the types of questions LPs are increasingly asking GPs on ESG.

This framework is aligned with the Initiative’s efforts to encourage informed and systematic dialogue between LPs and GPs about how ESG factors are considered in PE investment activities. Where feasible, the PRI has aligned its Reporting Framework with the ESG disclosure framework to support a consistent, pragmatic and cost-effective approach to discussing ESG strategy, policy and practices.

The document outlines eight objectives common to many LPs who want more structured ESG disclosures within their private equity investments. The first five objectives relate to the fund due diligence process, and the next three relate to disclosures during the life of the fund. Guidance is also provided on the disclosure of information around unexpected events that might pose reputation risks to an LP, GP or portfolio company.

Source: www.unpri.org