Private equity

There are several reasons for the recent momentum in responsible investment within private equity. Firstly, Limited Partners (LPs) are asking General Partners (GPs) to integrate environmental, social and governance (ESG) issues. Secondly, due to regulatory changes, the economic downturn and public scrutiny, the industry is under pressure to demonstrate that it is a responsible member of society in order to gain access to capital markets. Thirdly, there is a renewed focus on adding value to portfolio companies and ESG integration is a key way to do this.

Private equity is highly conducive to responsible investment because of its relatively long-term horizon; the typical holding period for a portfolio company is 3-7 years. In principle, private equity firms have influence over company management and are therefore able to promote ESG initiatives at the company level.

While there is momentum for responsible investment in private equity, LPs and GPs face a number of issues and challenges.  How can LPs and GPs effectively engage with one another? How do you develop processes for ESG integration into the investment analysis and decision-making and ownership activities?  What is the value of ESG integration?

About the work stream

The work stream was launched in 2008 with a handful of General Partners (GPs) and Fund of Funds (FoFs) and today is one of the PRI’s most mature, with over 240 GPs and FoFs and more than 160 Limited Partners (LPs) as members. The work stream brings together leaders and those new to the industry to collaborate, engage in debate and develop resources to support private equity investors wanting to implement responsible investment practices.

Get involved

The PRI work stream is advised by a signatory Advisory Committee. The PRI has launched an open call to signatories to apply for four open positions, effective from the start of 2016. Find out more on how to apply – the deadline is Monday 12 October 2015. For the list of current Committee members, click here.

The PRI has launched a public consultation on the drafted PRI Limited Partners Responsible Investment Due Diligence Questionnaire, a list of ESG due diligence questions that LPs could ask GPs pre-commitment. Click here for more information. The public consultation will run until Friday 4 September 2015.