LPs receive help on responsible investment

A United Nations initiative has drafted guidelines to help LPs ask the right questions of their GPs on the subject of environmental, social and corporate governance.

The United Nations’ Principles for Responsible Investment Initiative (PRI) has issued guidelines to help LPs in private equity funds engage with their GPs more effectively on the subject of environmental, social and corporate governance (ESG).

“We hope [the guide] will help to increase the number of LPs asking these questions of their GPs,” said Donald MacDonald, chair of the PRI, in a statement.

Major private equity investors, such as California Public Employees' Retirement System and the UK’s University Superannuation Scheme, are increasing their focus on how their GPs manage and report the ESG impact of their activity. In March this year, the PRI polled 15 limited partners – who between them account for more than $100 billion in assets allocated to private equity – and found that 93 percent of respondents expected GPs to report annually on responsible investment.

“The ownership model of private equity gives investors the ability to have a direct influence on the companies they own,” said Else Bos, chief executive of investments at the €90 billion Dutch pension fund PGGM, in a statement, “By working together to integrate ESG into the investment and ownership processes, LPs and GPs can help ensure that ESG issues are identified and addressed, leading to more sustainable and profitable companies.”

In February the dozen or so mega-firms represented by Washington, DC-based lobbying group the Private Equity Council signed up to a set of socially responsible investment guidelines that were drawn up based on dialogues with PRI signatories. Member firms include Bain Capital Partners, Permira and The Blackstone Group.