Reporting on ESG in Private Equity enriches the engagement with external managers and leads to improvement, writes Christine Winslow.
PGGM’s Private Equity Annual Responsible Investment Report 2019 is published
We manage our clients’ private equity investments in order to contribute towards a stable pension for their participants while also taking into consideration the impact we are having on the world around us.
We recognize that environmental, social, and governance (ESG) factors have a material impact on the financial performance of the private equity portfolio both through the identification of value creation opportunities and the mitigation of identified risks.
With the publication of PGGM’s Private Equity Annual Responsible Investment Report for 2019, we continue to further transparency and reporting regarding our ESG initiatives in line with what we ask from our private equity managers.
In 2019, we improved our GP engagement process such that we began engaging with every “continuing” manager (this excludes managers where we have decided not to commit to their most recent fund) at least once per year. In the past, we identified a select group of GPs to focus on each year based on a risk assessment, however we realized that we want to drive improvements with all our managers and that regular engagement was key. Further, spreading out the engagement over the course of the year makes it easier to manage.
We made this change around the middle of the year but were still able to engage with 32 of the 55 continuing GPs in our portfolio. Even more importantly, we were pleased to see meaningful improvements in how they are managing ESG at 23 of these. We expect to engage with all continuing GPs in 2020. In these discussions, we track progress but also continue to look for ways to improve and help to define next steps with each manager.
We have been particularly focused on improving ESG reporting from our managers in 2019 specifically encouraging a move towards reporting of portfolio company level ESG KPIs which we consider to be best in class. We are pleased that 17 of our GPs (31% of our continuing GPs and 24% of all our GPs) reported in this way in 2019, significantly up from only 9 in 2018. We hope to continue to make progress here in 2020.
In addition we are focused on improving reporting in the area of climate change and diversity & inclusion in 2020. We look forward to sharing our progress in this area next year.
Share or Print Article
click on the icon