Supply chain News and trends

Private market funds may soon need to open their books to scrutiny regarding their ESG performance, and many industry players are welcoming the change.

“I’m looking forward to seeing more disclosure and transparency in the private markets,” said Bonnie Foley-Wong, Canada sustainable investment leader with Mercer (Canada) Ltd. in Toronto. “Investors are asking for that and it will certainly help in terms of whole-portfolio management.”

Via EcoVadis

Some asset managers are retreating from their public ESG commitments due to so-called ‘greenhushing’ suggests a report into ESG investing in private markets.

The report, ‘The State of Private Market ESG and Impact Investing in 2024’, was published by PitchBook, a market data provider for the private equity and venture capital markets.

It found that firms are no longer prioritising some of their ESG and impact investing programs for fear of a backlash from opponents of green and sustainable investment strategies or for fear of reputational damage amid claims of greenwashing.

Via EcoVadis

In many ways, private equity is made to be invested in environmental, social and governance (ESG) initiatives. But it takes thoughtful strategies to ensure those investments generate maximum value for both business and society.

Record levels of cash reserves — including $1.1 trillion in the U.S. and another $6.3 trillion in assets under management — combined with increased investor focus on ESG could make private equity an attractive vehicle for creating real impact.  

Via EcoVadis

Mainstream private-equity funds need to ramp up data gathering to demonstrate how ESG issues are integrated in their investment processes, law firm Morrison Foerster says
Survey of 100 Asia-headquartered fund general partners with over US$1 billion in assets under management shows only 29 per cent always require the inclusion of clauses in investment documents to enhance or ensure ESG compliance

Via EcoVadis

Various environmental, social and governance (ESG)-related funds from Abrdn, Morgan Stanley and UBS have recently been renamed to omit sustainability-related phrases.

In addition, according to data from Morningstar Direct cited by the FT, launches of environmental, social and governance (ESG)-related funds have been steadily declining, with only six launched in the second half of 2023 compared to an average of nearly 100 a year between 2020 and 2022.

The trend follows a ruling from the SEC in September 2023 that 80% of assets in funds must be related to the name.

Via EcoVadis

As the regulatory landscape continues to evolve, integrating Environmental, Social, and Governance (ESG) considerations for new investment deals has become an increasingly imperative consideration for private equity firms. The term ESG has become a regular feature in business vocabulary. It is no longer just a matter of abstract compliance for private equity but also a strategic imperative for driving value. Transparent reporting of ESG measures is crucial to ensure fairness and accountability, and positively impacts the deal lifecycle for all. 

Via EcoVadis

By investing in earlier-stage companies and having controlling ownership, private equity has the potential to tackle ESG considerations effectively, according to Jennifer Signori, managing director, Neuberger Berman. Here, Signori discusses creating value, engaging with companies and calculating portfolios’ carbon footprints.

How does ESG create value within private equity?

Private equity investors are uniquely positioned to effect change, given they generally have controlling ownership of companies. This means private equity investors potentially have more ability to influence strategic and operational change – whether to tackle climate risks or other business challenges – than many public equity investors.

Via EcoVadis

The KEY ESG survey of 100 general partners and portfolio companies in Europe, the U.K. and U.S. found that while 75% were required to report ESG data to limited partners, 90% of them were unsure of how do to so. Survey respondents were primarily from midmarket private equity firms, with 43 each from Europe and the U.K., and 14 from the U.S.

One of the biggest problems for general partners was the time it takes to collect ESG data, which can be as long as 12 weeks. Survey respondents said they missed reporting deadlines and risked having deals stall or fail, and 70% said they would prefer to focus on the most material information that leads to better metrics and ESG performance.

Via EcoVadis