The Principles for Responsible Investment (PRI) has launched a project to develop guidance for Limited Partners (LPs or investors into PE funds) and General Partners (GPs or PE funds) on how to report on and monitor the Environmental Social Governance (ESG) integration practices of GPs during the lifetime of a private equity (PE) fund.
ERM has been appointed as the consultant on this project and will be responsible for conducting the research and co-authoring the guidance with the PRI. We will be supported by a global working group of over 40 PRI signatories.
The objectives of the project are to:
- present the value creation case to both LPs and GPs of reporting and monitoring ESG-related practices during the life of a fund;
- give a range of flexible options relevant to LPs and GPs on how to report and monitor ESG practices and issues that apply to investors at different levels of ESG integration maturity; and
- encourage a more consistent approach from LPs and GPs on ESG-related monitoring and reporting which will lead to a more streamlined approach across the sector.
The PRI is the world's leading proponent of responsible investment. It works to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.
Fiona Reynolds, managing director, PRI said: “With the start of this project, we begin the final stage in the selection, appointment and monitoring series. When completed, the private equity industry will have a full suite of tools available from the PRI for incorporating ESG considerations into the LP-GP exchange and dialogue. The size and diversity represented in the working group is testament to the demand for these tools.
The PRI PE Advisory Committee selected ERM as our partner for this critical piece of work not only for their in-depth experience of working with LPs and GPs on ESG integration in private equity, but also for their capacity to lead this multi-stakeholder dialogue across the globe.”
Commenting on the work, ERM CEO Keryn James said: “ERM is proud to work with the PRI on this project to develop practical guidance for LPs and GPs in order to enhance the effectiveness of their monitoring and reporting of ESG-information during the life of a fund.
From our experience working with private equity and other organizations, we know the value that can be achieved through taking a comprehensive approach to integrating ESG factors to deliver improved business performance.”
Background and working group members
More about the PRI
The PRI is truly independent. It encourages investors to use responsible investment to enhance returns and better manage risks, but does not operate for its own profit; it engages with global policymakers but is not associated with any government; it is supported by, but not part of, the United Nations.