Case study by France Invest
Industry collaboration: France Invest develops Reporting Recommendations
In an effort to address the disparity between requests from LPs on ESG reporting and to increase industry cooperation on ESG matters , France Invest decided to draw up recommendations based on the wide range of practices followed by French GPs and LPs to reorganise the way that ESG information is exchanged. The objectives are to improve the transparency of the approaches taken and encourage more effective consideration of ESG issues that are material to funds and companies. France Invest has invited its members to apply these recommendations; the ESG Commission of France Invest would also like to share these recommendations with its international peers to encourage aligned practices.
France Invest recommends that GPs disclose their ESG activities to their LPs in an annual ESG report for the fund in which the LP has invested, and has proposed a set of common tracking indicators for the management company and the fund’s underlying investments.
The Reporting Recommendations propose 11 common indicators for business conduct and ESG integration in the investment process at the management company level, and 11 common ESG indicators at the portfolio company level. The portfolio company indicators include topics such as carbon footprint monitoring, job creation, monitoring of turnover and absenteeism, board diversity and board member independence. Furthermore, the recommendations propose definitions for each of the indicators, to help the move towards more standardised reporting.
In turn, France Invest recommends that LPs:
- Share any changes to their reporting requirements with GPs as early as possible to enable them to anticipate and prepare for any impacts;
- Stabilise and harmonise among themselves the timing and content of their reporting requirements, to the greatest extent possible; and
- Regularly give feedback to GPs based on the information collected to foster a process of continuous improvement.
The Reporting Recommendations note that it is essential for GPs to concentrate ESG criteria on material issues in order to promote buy-in among managers and internal teams, as focusing on matters with genuine significance is the only approach likely to contribute to sustainable value creation.
The ESG Commission’s recommendations can be found in both French and English on the France Invest website.
ESG monitoring, reporting and dialogue in private equity
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Case study: France Invest