What was once a reputational issue has now become a mainstay of the private equity approach – many institutional investors, as signatories to the UN Principles for Responsible Investment, now expect fund managers to be able to demonstrate a deeper commitment to ESG issues by having a coherent and structured framework in place.
ESG risks are now considered to have a material impact on investment valuation. Many private equity and venture capital houses have already recognised the value of ESG initiatives, not only in achieving environmental and social change, but also in reducing costs and minimising risks.
Responsible investment is considered fundamental to value creation. Some of the best examples can be found in the winners of the BVCA Responsible Investment Awards, our platform for members to showcase their commitment and success to integrating ESG practices into their investment strategies.
A new Environmental, Social and Corporate Governance (ESG) Disclosure Framework for Private Equity was released on 25 March 2013, following a 16 month consultation and drafting process that involved a group of more than 40 limited partners (LP), 20 Private Equity Associations (including the BVCA), and 10 leading general partners (GP).
The Framework is in response to changing and diverse expectations for the disclosure of ESG information from GPs and on their portfolio companies.
The Framework aims to:
There are two parts to the framework covering:
Disclosures during fundraising, where the GP should seek to disclose information sufficient to enable an LP that has expressed an interest in ESG management to meet five objectives. These objectives include alignment of policy and the GP's approach to ESG and policies, processes and systems in place.
Disclosures during the life of the fund, where the GP should disclosure information to meet three objectives including whether the GP is acting in a manner consistent with its investment policies re ESG management.
The Framework includes a set of questions LPs may use to assist them in addressing the 8 objectives. Read more
Published in March 2015 and produced in association with PwC, this supplement to our Guide to Responsible Investment shows how private equity and venture capital-backed companies are putting environmental, social and governance policies into practice and features a series of case studies drawn from entries to the BVCA’s Responsible Investment Awards over the last two years. The supplement looks at examples from both firm and portfolio level, including Scottish Equity Partners, 3i and Palatine, as well as Manx Telecom, Wyevale Garden Centres, LM Wind Power and Crown Paints.
2015 - VIEW GUIDE
Published in February 2014, this updated version of the BVCA Guide to Responsible Investment contains new guidance and case studies which take into account the changing nature of the responsible investment agenda, providing private equity and venture capital fund managers with a reference tool on how to manage environmental, social and corporate governance (ESG) risks and opportunities. This guide provides detailed and practical advice on how ESG factors can be managed throughout the life cycle of investments.
In the marketplace, ESG issues can have a real impact on business value and investment risk, and a well-founded approach to these issues is critical. Many portfolio companies, particularly consumer-facing businesses, recognise that a strong ESG focus can enhance their brand value and reputation.
2014 - VIEW GUIDE
Published in October 2012 in conjunction with PwC and Waterman Group, this edition of the Guide to Responsible Investment was the first to provide detailed and practical advice for private equity and venture capital firms seeking to understand environmental, social and governance (ESG) risks and opportunities, and incorporate these within a structured investment framework.
2012 - VIEW GUIDE
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