The United Nations-backed Principles for Responsible Investment (PRI) launched a public consultation this week on a list of questions LPs can put to managers on their ESG practices prior to making a fund commitment.
The group has some 44 members hailing from all over the globe – including 27 LPs or fund of funds and 17 GPs –all prepared to take on the task of creating a detailed but practical due diligence questionnaire (DDQ) by this October, as previously reported on pfm.
PRI is seeking feedback on whether the questionnaire establishes the core information that an LP needs to know about a GP’s ESG practices; whether the proposed questions are phrased to allow a LP to put them to a diverse range of GPs; and whether the requests for information from a GP are reasonable.
Once finalized, the questionnaire will be accompanied by guidelines that include more detailed questioning and information on how a GP can respond.
The consultation, which will close on September 4, is part of an industry-wide discussion on the standardization of ESG reporting.
When polled, audience members at the 2015 PRI/PEI Responsible Investment Forum in London this week, which included GPs and LPs, were broadly in support of a standardization of the way LPs and GPs communicate.
Speaking on a panel on the topic, Apax Partners investor relations director Ellen de Kreij supported consistency in “some core elements” in reporting, but called for a degree of flexibility to address LPs’ specific concerns. Her co-panelist Thomas Kristensen, executive director at LGT Capital Partners, agreed with her suggestion that there could be a standardized list covering 80 percent of LP requirements, with the remaining 20 percent open for more fund-specific questions.
When the audience was asked what LPs should ask GPs, 44 percent of the audience agreed they should ask anything that they want to help them assess a GP’s approach to ESG integration. Coming second, 31 percent said LPs should ask for any ESG information they would use.
LPs need to identify what information they want and what they are going to do with it, Kristensen said. “People can ask whatever they want but they have a responsibility to use what they get back.”
De Kreij highlighted the increased reporting demands LPs placed on GPs’ time. Apax is receiving rising numbers of inbound inquiries from its 225 LPs and some want information at the portfolio level. “We aim to please but I ask if this is how we should be spending our time,” she said.
However, PGGM advisor Tim van der Weide countered that LPs have the right to ask any questions of GPs, noting that LPs themselves have a responsibility to their own beneficiaries who have particular agendas.