ILPA converges with PRI on due diligence questionnaire

ILPA has 'adopted in full' the PRI's approach in the latest update to its template due diligence questionnaire,

The Institutional Limited Partners Association, the organisation that represents limited partners in private equity, has updated two of its template documents: its due diligence questionnaire and diversity metrics template.

The updates are designed to “reflect changes in the marketplace” and take in comments from market participants, the organisation said. The updated documents can are here.

One notable change is that ILPA has adopted in full the UN PRI’s LP private equity responsible investment due diligence questionnaire as the ESG section of its template DDQ.

“Having collaborated with the [PRI] on the ESG section within the ILPA DDQ in 2016, ILPA once again joined up with PRI to refine the ESG questions in this latest revision and promote convergence in ESG-related information,” ILPA said, adding that the PRI document had been adopted in full.

“One of the key evolutions in the updated version is the inclusion of specific questioning around climate considerations in the investment process,” said UN PRI’s private equity specialist Peter Dunbar.

Standardisation of ESG data is viewed as vital to ensure investors can make informed decisions, and that managers can keep up with information requests. The convergence of these two organisations’ approach to gathering ESG information represents another step towards this goal. In late September, a group of influential investors announced a project to share a small number of ESG data points on an ongoing basis, to allow LPs to track and compare performance across their portfolios, as reported by affiliate New Private Markets.

The ILPA DDQ is its most downloaded resource. The diversity metrics template sits alongside the DDQ questionnaire and can track the annual progress towards diversity goals over time. Metrics include a host of information on ethnic and gender identity diversity at various levels of a firm, as well as retention statistics, for example.

“Market practices – and ILPA’s own guidance in response, as reflected in the ILPA Principles – have evolved significantly since the release of the DDQ in 2013. While DE&I is a comparatively newer area of focus for LPs, the industry is experiencing a sea change in LPs’ appetite for more nuanced information about team diversity and GP actions to advance DEI,” said Steve Nelson, CEO of ILPA.

The updated DDQ includes sections on co-investments, GP-led secondaries, credit facilities and data security.

Changes to the diversity metrics template include: “a single set of globally relevant designations for race and ethnicity, the inclusion of a non-binary option on gender, additional self-identified dimensions of diversity such as LGBTQ+ and persons with disabilities, a simplified structure for role designations across ownership and professionals, insight into staff movement and select portfolio company level data.”