integrating esg in pe
TRANSCRIPT
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 14
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 24
STEP 983089 INTEGRATING ESG FACTORSWITHIN A GP ORGANISATION
It is important for a GP to have an appropriate organisationalstructure and culture in place as this enables it to takeinto account the full spectrum of ESG issues in its businessanalysis This could include
Commitment to ESG integration ndash a formalcommitment from the top of the organisation toguarantee sustained institutional dedication andresources a person or team responsible for ESGconsiderations with the relevant expertise employees
educated on the rationale strategy and practices forintegrating ESG linking ESG objectives to employeeevaluation
Setting ESG objectives ndash set and communicateobjectives for ESG integration establish an operationsgroup or use consultants to monitor portfoliocompanies
Engage with stakeholders ndash engage with collaborativeinitiatives engage with LPs
STEP 983090 INTEGRATING ESG FACTORS
INTO THE INVESTMENT PROCESSGPs could use the following general tips in developing anddeploying their framework
Align your framework for ESG integration withexisting tools and standards to ensure it is based oninternational standards and good industry practices
Ensure the investment team has access to ESGexpertise
Be sensitive to regional differences which may influencethe due diligence process and the level of engagementwith portfolio companies during ownership
Perform a ldquopilot runrdquo of the framework for ESGintegration ndash trial it with the current portfolio anduse the results to ldquodemystifyrdquo ESG factors for yourinvestment team
The guide suggests more specific practices5 which a GPcould utilise to integrate ESG considerations into thedue diligence investment decision and agreement andownership phases of the investment process
DUE DILIGENCE
Screening
compile a checklist to screen for high-level ESG risks
establish an exclusion list for high-level checks
Company deep dive
consider resource allocation for ESG due diligence
use due diligence questions in industry toolkits
INVESTMENT DECISION
include ESG considerations as standard practice ininvestment committee discussions
include ESG findings from due diligence in theinvestment memorandum
INVESTMENT AGREEMENT
share ESG objectives policies and practices withportfolio company
use templates from existing industry toolkits tointegrate ESG clauses into investment agreement
seek formal commitment from portfolio company byincorporating ESG issues into the deal documents and or the 100 day plan
collaborate with portfolio company to draft 100 dayplan
formulate a roadmap with a 3-5 year horizon with clearprocess benchmarks
5 Please note that this is a non-exhaustive list of suggested practices
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 34
INTEGRATING ESG IN PRIVATE EQUITY | 983090983088983089983092
3
OWNERSHIP
Engagement
collaborate with portfolio company to set up an ESGprogramme
leverage portfolio company board to implement ESGinitiatives
leverage ESG expertise and experience across theportfolio
conduct periodic site visits
Monitoring
define company specific or portfolio wide ESGindicators
prioritise ESG issues and focus on the most importantissues in the shortmedium term
ensure ESG considerations are consistently on theportfolio companyrsquos board agenda
provide portfolio company with tools to monitor andmeasure ESG practices
collect information on ESG developments from portfoliocompany and include in annual review
monitor ESG developments in internal review meetings
Reporting to LPs
agree upon the form and frequency of reporting
PREPARATION OF THE GUIDE
Over 50 GPs and LPs across the globe were interviewedduring the development of the guide and the guidancepoints presented are reflective of current practice It alsopoints to industry resources and case studies that cover arange of geographies investment strategies and GP sizesand highlights practices from GPs which are at differentstages of ESG integration
The PRI engaged Spring Associates to conduct the researchand develop the content for this Guide The document wasco-written by Spring Associates and the PRI Secretariatwith input from the PRI GP Guide Working Group The PRISecretariat would like to thank all contributors for theirsignificant input into this document including
PRI GP GUIDE WORKING GROUP Chair Haran Narulla Blue Wolf Capital Partners
Sara Robinson Adams Street Partners
Marta Jankovic APG Asset Management
Candice Brenet Ardian
Michelle Kathryn Essomeacute and Dara Owoyemi AVCA
Lauren Caplan Commonfund
Chloeuml Sanders CVC Capital Partners
Jennifer Choi EMPEA Thereacutese Lennehag EQT
Yannick Grandjean Eurazeo
Caitlyn MacDonald and Kimberlie Saint Louis First Reserve
Peter Tynan Global Environment Fund
Ana Lei Ortiz Hamilton Lane
Joanne Saleeba HESTA Super Fund
Andrew Malk and Topaz Simply Malk Sustainability Partners
Darren Massara NewQuest Capital Partners
Blaise Duault PAI Partners
Dushy Sivanithy Pantheon
Tim van der Weide PGGM Silva Deželan Rabobank
AUTHORSMaarten Biermans Ebel Kemeling and Willem van LanschotSpring AssociatesFong Yee Chan and Natasha Buckley PRIEdited by Akif Chaudhry and Brett Phillips PRIDesigned by Alessandro Boaretto PRI
CONTACT PRIimplementationsupportunpriorg wwwunpriorg
CONTACT SPRING ASSOCIATESebelkemelingspring-associatescommaartenbiermansspring-associatescomwwwspring-associatescom
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 44
The PRI is an investor initiative in partnership with
UNEP Finance Initiative and the UN Global Compact
UN Global Compact
Launched in 2000 the United Nations Global Compact is a both a policy platformand a practical framework for companies that are committed to sustainability andresponsible business practices As a multi-stakeholder leadership initiative it seeksto align business operations and strategies with 10 universally accepted principles inthe areas of human rights labour environment and anti-corruption and to catalyseactions in support of broader UN goals With 7000 corporate signatories in 135
countries it is the worldrsquos largest voluntary corporate sustainability initiative
More information wwwunglobalcompactorg
United Nations Environment Programme Finance Initiative (UNEP FI)
UNEP FI is a unique partnership between the United Nations Environment Programme(UNEP) and the global financial sector UNEP FI works closely with over 200financial institutions that are signatories to the UNEP FI Statement on SustainableDevelopment and a range of partner organisations to develop and promote linkagesbetween sustainability and financial performance Through peer-to-peer networksresearch and training UNEP FI carries out its mission to identify promote and realisethe adoption of best environmental and sustainability practice at all levels of financialinstitution operations
More information wwwunepfiorg
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 24
STEP 983089 INTEGRATING ESG FACTORSWITHIN A GP ORGANISATION
It is important for a GP to have an appropriate organisationalstructure and culture in place as this enables it to takeinto account the full spectrum of ESG issues in its businessanalysis This could include
Commitment to ESG integration ndash a formalcommitment from the top of the organisation toguarantee sustained institutional dedication andresources a person or team responsible for ESGconsiderations with the relevant expertise employees
educated on the rationale strategy and practices forintegrating ESG linking ESG objectives to employeeevaluation
Setting ESG objectives ndash set and communicateobjectives for ESG integration establish an operationsgroup or use consultants to monitor portfoliocompanies
Engage with stakeholders ndash engage with collaborativeinitiatives engage with LPs
STEP 983090 INTEGRATING ESG FACTORS
INTO THE INVESTMENT PROCESSGPs could use the following general tips in developing anddeploying their framework
Align your framework for ESG integration withexisting tools and standards to ensure it is based oninternational standards and good industry practices
Ensure the investment team has access to ESGexpertise
Be sensitive to regional differences which may influencethe due diligence process and the level of engagementwith portfolio companies during ownership
Perform a ldquopilot runrdquo of the framework for ESGintegration ndash trial it with the current portfolio anduse the results to ldquodemystifyrdquo ESG factors for yourinvestment team
The guide suggests more specific practices5 which a GPcould utilise to integrate ESG considerations into thedue diligence investment decision and agreement andownership phases of the investment process
DUE DILIGENCE
Screening
compile a checklist to screen for high-level ESG risks
establish an exclusion list for high-level checks
Company deep dive
consider resource allocation for ESG due diligence
use due diligence questions in industry toolkits
INVESTMENT DECISION
include ESG considerations as standard practice ininvestment committee discussions
include ESG findings from due diligence in theinvestment memorandum
INVESTMENT AGREEMENT
share ESG objectives policies and practices withportfolio company
use templates from existing industry toolkits tointegrate ESG clauses into investment agreement
seek formal commitment from portfolio company byincorporating ESG issues into the deal documents and or the 100 day plan
collaborate with portfolio company to draft 100 dayplan
formulate a roadmap with a 3-5 year horizon with clearprocess benchmarks
5 Please note that this is a non-exhaustive list of suggested practices
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 34
INTEGRATING ESG IN PRIVATE EQUITY | 983090983088983089983092
3
OWNERSHIP
Engagement
collaborate with portfolio company to set up an ESGprogramme
leverage portfolio company board to implement ESGinitiatives
leverage ESG expertise and experience across theportfolio
conduct periodic site visits
Monitoring
define company specific or portfolio wide ESGindicators
prioritise ESG issues and focus on the most importantissues in the shortmedium term
ensure ESG considerations are consistently on theportfolio companyrsquos board agenda
provide portfolio company with tools to monitor andmeasure ESG practices
collect information on ESG developments from portfoliocompany and include in annual review
monitor ESG developments in internal review meetings
Reporting to LPs
agree upon the form and frequency of reporting
PREPARATION OF THE GUIDE
Over 50 GPs and LPs across the globe were interviewedduring the development of the guide and the guidancepoints presented are reflective of current practice It alsopoints to industry resources and case studies that cover arange of geographies investment strategies and GP sizesand highlights practices from GPs which are at differentstages of ESG integration
The PRI engaged Spring Associates to conduct the researchand develop the content for this Guide The document wasco-written by Spring Associates and the PRI Secretariatwith input from the PRI GP Guide Working Group The PRISecretariat would like to thank all contributors for theirsignificant input into this document including
PRI GP GUIDE WORKING GROUP Chair Haran Narulla Blue Wolf Capital Partners
Sara Robinson Adams Street Partners
Marta Jankovic APG Asset Management
Candice Brenet Ardian
Michelle Kathryn Essomeacute and Dara Owoyemi AVCA
Lauren Caplan Commonfund
Chloeuml Sanders CVC Capital Partners
Jennifer Choi EMPEA Thereacutese Lennehag EQT
Yannick Grandjean Eurazeo
Caitlyn MacDonald and Kimberlie Saint Louis First Reserve
Peter Tynan Global Environment Fund
Ana Lei Ortiz Hamilton Lane
Joanne Saleeba HESTA Super Fund
Andrew Malk and Topaz Simply Malk Sustainability Partners
Darren Massara NewQuest Capital Partners
Blaise Duault PAI Partners
Dushy Sivanithy Pantheon
Tim van der Weide PGGM Silva Deželan Rabobank
AUTHORSMaarten Biermans Ebel Kemeling and Willem van LanschotSpring AssociatesFong Yee Chan and Natasha Buckley PRIEdited by Akif Chaudhry and Brett Phillips PRIDesigned by Alessandro Boaretto PRI
CONTACT PRIimplementationsupportunpriorg wwwunpriorg
CONTACT SPRING ASSOCIATESebelkemelingspring-associatescommaartenbiermansspring-associatescomwwwspring-associatescom
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 44
The PRI is an investor initiative in partnership with
UNEP Finance Initiative and the UN Global Compact
UN Global Compact
Launched in 2000 the United Nations Global Compact is a both a policy platformand a practical framework for companies that are committed to sustainability andresponsible business practices As a multi-stakeholder leadership initiative it seeksto align business operations and strategies with 10 universally accepted principles inthe areas of human rights labour environment and anti-corruption and to catalyseactions in support of broader UN goals With 7000 corporate signatories in 135
countries it is the worldrsquos largest voluntary corporate sustainability initiative
More information wwwunglobalcompactorg
United Nations Environment Programme Finance Initiative (UNEP FI)
UNEP FI is a unique partnership between the United Nations Environment Programme(UNEP) and the global financial sector UNEP FI works closely with over 200financial institutions that are signatories to the UNEP FI Statement on SustainableDevelopment and a range of partner organisations to develop and promote linkagesbetween sustainability and financial performance Through peer-to-peer networksresearch and training UNEP FI carries out its mission to identify promote and realisethe adoption of best environmental and sustainability practice at all levels of financialinstitution operations
More information wwwunepfiorg
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 34
INTEGRATING ESG IN PRIVATE EQUITY | 983090983088983089983092
3
OWNERSHIP
Engagement
collaborate with portfolio company to set up an ESGprogramme
leverage portfolio company board to implement ESGinitiatives
leverage ESG expertise and experience across theportfolio
conduct periodic site visits
Monitoring
define company specific or portfolio wide ESGindicators
prioritise ESG issues and focus on the most importantissues in the shortmedium term
ensure ESG considerations are consistently on theportfolio companyrsquos board agenda
provide portfolio company with tools to monitor andmeasure ESG practices
collect information on ESG developments from portfoliocompany and include in annual review
monitor ESG developments in internal review meetings
Reporting to LPs
agree upon the form and frequency of reporting
PREPARATION OF THE GUIDE
Over 50 GPs and LPs across the globe were interviewedduring the development of the guide and the guidancepoints presented are reflective of current practice It alsopoints to industry resources and case studies that cover arange of geographies investment strategies and GP sizesand highlights practices from GPs which are at differentstages of ESG integration
The PRI engaged Spring Associates to conduct the researchand develop the content for this Guide The document wasco-written by Spring Associates and the PRI Secretariatwith input from the PRI GP Guide Working Group The PRISecretariat would like to thank all contributors for theirsignificant input into this document including
PRI GP GUIDE WORKING GROUP Chair Haran Narulla Blue Wolf Capital Partners
Sara Robinson Adams Street Partners
Marta Jankovic APG Asset Management
Candice Brenet Ardian
Michelle Kathryn Essomeacute and Dara Owoyemi AVCA
Lauren Caplan Commonfund
Chloeuml Sanders CVC Capital Partners
Jennifer Choi EMPEA Thereacutese Lennehag EQT
Yannick Grandjean Eurazeo
Caitlyn MacDonald and Kimberlie Saint Louis First Reserve
Peter Tynan Global Environment Fund
Ana Lei Ortiz Hamilton Lane
Joanne Saleeba HESTA Super Fund
Andrew Malk and Topaz Simply Malk Sustainability Partners
Darren Massara NewQuest Capital Partners
Blaise Duault PAI Partners
Dushy Sivanithy Pantheon
Tim van der Weide PGGM Silva Deželan Rabobank
AUTHORSMaarten Biermans Ebel Kemeling and Willem van LanschotSpring AssociatesFong Yee Chan and Natasha Buckley PRIEdited by Akif Chaudhry and Brett Phillips PRIDesigned by Alessandro Boaretto PRI
CONTACT PRIimplementationsupportunpriorg wwwunpriorg
CONTACT SPRING ASSOCIATESebelkemelingspring-associatescommaartenbiermansspring-associatescomwwwspring-associatescom
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 44
The PRI is an investor initiative in partnership with
UNEP Finance Initiative and the UN Global Compact
UN Global Compact
Launched in 2000 the United Nations Global Compact is a both a policy platformand a practical framework for companies that are committed to sustainability andresponsible business practices As a multi-stakeholder leadership initiative it seeksto align business operations and strategies with 10 universally accepted principles inthe areas of human rights labour environment and anti-corruption and to catalyseactions in support of broader UN goals With 7000 corporate signatories in 135
countries it is the worldrsquos largest voluntary corporate sustainability initiative
More information wwwunglobalcompactorg
United Nations Environment Programme Finance Initiative (UNEP FI)
UNEP FI is a unique partnership between the United Nations Environment Programme(UNEP) and the global financial sector UNEP FI works closely with over 200financial institutions that are signatories to the UNEP FI Statement on SustainableDevelopment and a range of partner organisations to develop and promote linkagesbetween sustainability and financial performance Through peer-to-peer networksresearch and training UNEP FI carries out its mission to identify promote and realisethe adoption of best environmental and sustainability practice at all levels of financialinstitution operations
More information wwwunepfiorg
8122019 Integrating ESG in PE
httpslidepdfcomreaderfullintegrating-esg-in-pe 44
The PRI is an investor initiative in partnership with
UNEP Finance Initiative and the UN Global Compact
UN Global Compact
Launched in 2000 the United Nations Global Compact is a both a policy platformand a practical framework for companies that are committed to sustainability andresponsible business practices As a multi-stakeholder leadership initiative it seeksto align business operations and strategies with 10 universally accepted principles inthe areas of human rights labour environment and anti-corruption and to catalyseactions in support of broader UN goals With 7000 corporate signatories in 135
countries it is the worldrsquos largest voluntary corporate sustainability initiative
More information wwwunglobalcompactorg
United Nations Environment Programme Finance Initiative (UNEP FI)
UNEP FI is a unique partnership between the United Nations Environment Programme(UNEP) and the global financial sector UNEP FI works closely with over 200financial institutions that are signatories to the UNEP FI Statement on SustainableDevelopment and a range of partner organisations to develop and promote linkagesbetween sustainability and financial performance Through peer-to-peer networksresearch and training UNEP FI carries out its mission to identify promote and realisethe adoption of best environmental and sustainability practice at all levels of financialinstitution operations
More information wwwunepfiorg