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More than 90% of LPs call for GPs to assess ESG risk

CalPERS, USS and CalSTRS are among the LPs calling for GPs to provide material consideration of environmental, social and corporate governance risks to their portfolios, according to a survey conducted by the UN’s Private Equity Principles for Responsible Investment.

Nearly all limited partners want general partners to address issues of environmental, social and corporate governance (ESG), according to preliminary results from a poll of 15 major institutional investors.

The United Nations Private Equity Principles for Responsible Investment (PRI) surveyed LPs including the California Public Employees' Retirement System, the UK’s University Superannuation Scheme and the California State Teachers' Retirement System and found 93 percent want an annual update on material ESG risks to their portfolios.

 It is not just about climate change and human rights. It is about risk and opportunities and about getting returns.

Tom Rotherham

More than 85 percent of LPs also called for information on ESG risks to be provided during capital calls, while 93 percent planned to prepare an ESG questionnaire for their GPs. The poll’s final results have yet to be released.

There are around 170 LPs signed up to PRI, which aim to help investors integrate ESG issues into the investment decision making process, as well as more than 230 GP signatories, all of which are listed online.

“We have been encouraging GPs to look at the signatories and if any of their LPs are on it then they should start anticipating that they will be asked questions about ESG,” Tom Rotherham, special advisor to Private Equity Principles for Responsible Investment and head of corporate responsibility at business communications firm Radley Yeldar, said in an interview.

“There is a common sense objective here. It is not just about climate change and human rights. It is about risk and opportunities and about getting returns,” he said, adding that ESG is a commercial agenda and not a political one.

In February the dozen or so mega-firms represented by Washington, DC-based lobbying group the Private Equity Council signed up to a set of socially responsible investment guidelines that were drawn up based on dialogues with PRI signatories. Member firms include Bain Capital Partners, Permira and The Blackstone Group.