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Reporting

Monitoring, reporting and disclosing ESG information facilitates assessment of added value, and contributes to building trust between a GP and its stakeholders, especially its LPs.

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LP-GP reporting:

A number of responsible investment reporting and disclosure initiatives have been developed for LPs and GPs. Those which are most relevant are listed below:

The ESG Disclosure framework has been developed to help GPs better understand why LPs want ESG related information, and to help rationalise the types of questions that LPs are increasingly asking GPs on ESG matters.

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The Principles for Responsible Investment (PRI) Reporting framework requires signatory GPs to annually disclose how they consider RI and ESG matters:

  • when fundraising and in legal agreements
  • In pre-investment evaluation activities
  • In post-investment monitoring/ownership activities
  • At exit, and
  • When disclosing information to stakeholders

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The PRI Limited Partners Due Diligence Questionnaire is a list of questions designed to help LPs understand and evaluate how GPs integrate material ESG factors into their investment practices, before committing.

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The Institutional Limited Partners Association (ILPA) Due Diligence Questionnaire is similar to the PRI’s version but originally tailored to a US audience. However, as the ILPA is increasing its European exposure, this document may be of interest to European GPs as well.

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Public reporting, mandatory and voluntary:

In the UK, the Modern Slavery Act requires all companies carrying out any business in the UK and/or with a global annual turnover of over £36 million to publish a slavery and human trafficking statement for each financial year.

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In the UK, any company with more than 250 employees must publish its gender pay gap data by 4/4/18, and annually thereafter

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Other country-specific ESG-related regulations may apply, such as the obligation for institutional investors in France to disclose the carbon footprint of their portfolios.

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The journey towards ESG reporting needs to be considered in line with the house’s ambition towards responsible investment.

A well-defined reporting strategy presents several advantages:

  • A better alignment of interests and expectations with stakeholders, preserving the GP’s license to operate,

  • A support to fund raising activities, providing tangible evidence of the GP’s responsible investment approach and ESG performance,

  • An enhanced reputation.

Maturity of reporting approach

Maturity of reporting approach

Top tips

HOW TO REPORT ON RESPONSIBLE INVESTMENT?

  • Consider preparing a “standard” response to LP enquiries on responsible investment (perhaps using the PRI DDQ as a model). This will avoid responding to most LP enquiries individually.

  • If you are a PRI signatory, prepare early for the annual (mandatory) reporting requirements, ensuring that you take into account that sections of your submission will be in the public domain.