Public ESG reporting: a new requirement?

Publicly reporting your environmental, social and governance efforts is an important step towards transparency at the firm, say panelists at Private Equity International‘s fourth annual Responsible Investment Forum.

“By making your report public, you’re instilling good practices at the firm and portfolio level,” said one investment manager and UN Principles for Responsible Investment signatory.

For private equity firms, publicly reporting anything is a bit of a stretch, but reporting your ESG results would be a step toward not only appeasing ESG-minded investors but ensuring that the people who work at your firm feel good about being there. “This helps us to continue to ensure alignment with management teams, with employees and it helps us recruit and retain talent at our companies,” said one investor relations professional. “As we all know, the workforce is more and more incentivized to work at more mission-driven organizations.”

Standard deviation

Throughout the two-day Responsible Investment Forum hosted by sister title Private Equity International, many panelists remarked on the unlikelihood of standardized ESG reporting coming into fruition industry-wide, even as other industries trudge toward commonly accepted reporting templates. The nature and function of different funds operating a variety of different strategies isn’t easy to compare at an accessible level, those people say.

“I’m not sure standardized [ESG] reporting is the answer,” said one ESG director.

Some of the biggest players in the industry have made efforts to present a friendlier face in recent months, in light of increased public scrutiny of the industry. KKR and TPG, ranked third and twelfth, respectively, on the PEI 300 list of the world’s biggest private equity firms, have agreed to follow principles laid out by the World Bank’s International Finance Corporation, requiring fund managers to have their positive and negative ESG impacts verified by independent assessors and to update them annually.

The demand for results analysis, as opposed to simply raw data, to document the effects of ESG investments seems to only be growing – and panelists agreed that owning your results is an essential way of earning and maintaining trust.

“We don’t want to see data,” said one impact investor. “We want to see progress.”