The UN-supported Principles for Responsible Investment (PRI) put together a workbook that contains practical guidance for private fund advisors wanting to better integrate environmental, social and governance (ESG) considerations into their dealmaking process.
At the end of 2013, more than 130 LPs and 150 GPs had signed their names to the initiative, which asks groups to pledge to a responsible investment ethos.
The PRI report acknowledges “there is no one-size-fits-all approach to ESG integration” but offers readers a step-by-step action plan to build from that begins with appointing an in-house ESG expert and ends with engaging LPs to better understand their ESG-related expectations.
Throughout the report, case studies are offered to illustrate how ESG factors can be integrated at a practical level.
The report also serves as a directory for further ESG guidance. For example, with respect to engaging stakeholders, the PRI cites its “ESG Disclosure Framework for Private Equity” as a resource for questions that “may be helpful in guiding the dialogue between LPs and GPs on ESG disclosure”.
The PRI interviewed some 50 GPs and LPs, including Kohlberg Kravis Roberts and TPG Capital, to gain a window into current ESG best practices.
The report comes at a time of growing investor interest in responsible investment. A strong majority (75 percent) of LPs now ask GPs about their ESG management during due diligence, according to 2013 Malk Sustainability Partners research.