According to a survey by Bain & Company and the Institutional Limited Partners Association, LPs say ESG goals matter more than ever. But at the same time, few ask for the relevant performance data, and few GPs are able to supply it.
The organizations didn’t disclose the sample size of the survey – a full version of which will be published in “the coming months,” they said, but it is clear that ESG is a high priority for LPS. Seventy percent of investor respondents said their firms’ investment policies include ESG.
Half of LPs also said private equity firms incorporating ESG will see better investment performance. And 93 percent of LPs would walk away from an investment opportunity if it posed an ESG concern.
But LPs and private equity firms frequently lack the tools to measure what’s working – and what’s not. According to the survey, fewer than 25 percent of GPs can provide data on Greenhouse Gas Protocol scope 1 and 2 emissions all or most of the time. And less than 35 percent of GPs can provide data on all principal adverse indicators all or most of the time.
Meanwhile, investors are not getting the ESG data they need. Only a small number of LPs, less than 20 percent, ask for ESG key performance indicator reporting from their GPs. Even when investors ask for the information, most GPs can’t provide the relevant data.
Nonetheless, private equity firms are finding ways to measure ESG with the development of reliable ways to measure impact and compliance, according to the report. Third-party service providers can provide companies with real-time monitoring of emissions and other sustainability metrics.