Private Equity News & Analysis

Responsible Investment Forum: Key takeaways

Almost 300 industry professionals gathered in London this week for PEI's Responsible Investment Forum. Here are four takeaways.

-

Nearly 300 industry professionals gathered in London this week for PEI‘s Responsible Investment Forum, now on its 10th run.

ESG integration and impact investing have become more mainstream, and challenges around data collection, reporting and measurement still exist.

Here’s what we heard:

Impact Investing panel (from L to R): Greg Shell, Bain Capital; Kirk Hourdajian, TPG; Michele Giddens, Bridges Fund Management; and Silva Dezelan, Robeco.
  1. The industry needs good impact management

Standardising the quality of impact reporting is a major pain point, panellists and delegates agreed. This is complicated by several organisations working on the same topic: the International Finance Corporation published its Operating Principles of Impact Management in April, and the Global Impact Investing Network has IRIS+.

The challenge is having clear reporting and metrics on ESG goals, as well as sub-targets that can be compared across portfolios. As David Lomas, BlackRock‘s global head of sales and marketing for alternatives pointed out: “There’s a wealth of untapped data and resources that would provide great information advancement for GPs – there is value-add there in this space; you just got to learn to harness it, measure it, manage it and report it.”

  1. SDGs can be confusing for both LPs and GPs

The UN’s Sustainable Development Goals are adding another layer of confusion for LPs and GPs, according to Ellen de Kreij, operating advisor for sustainability at Apax Partners.

“There’s a lot of talk about SDGs – many want to do things and think this can be a great framework but it’s difficult to find the ways to do that,” added Anna Foller, sustainability manager at Swedish pension AP Fonden 6. “We don’t see lots of tangible things being reported to us on SDG.”

  1. Evaluating net impact returns remains the biggest hurdle

AP6, Dutch asset manager PGGM and LGT Capital Partners were asked where their institutions are when it comes to assessing the net impact returns of their investments.

“We’d love to be able to measure net impact, but we are really far from being able to do such a thing,” said Foller. The sheer number of investments in the firm’s PE portfolio – about 500 companies to date – makes that challenging, and the level of information accessible is a patchwork, she added.

  1. Impact investing is an unstoppable one-way trend

Panellists agreed that the industry will see more impact funds sitting alongside mainstream funds in the next decade. GPs and LPs expect more collaboration across the industry as they create solutions to big societal challenges.

Michele Giddens, co-founder and partner of London-based impact investment firm Bridges Fund Management, predicted greater democratisation of impact investing.

“Pensioners themselves over the next five years will ask where their money is going. This will ultimately drive change; pensioners want their money invested in the causes they care about,” Giddens said.

“Technology will unleash a real wave of democratisation and empowerment.”