As institutional investors display greater desire to invest in private equity funds that consider environmental, social, and governance (ESG) issues throughout their investment cycle, there has been little consensus on what information should be requested from fund managers to understand their ESG standing.
A new framework is attempting to shed some light on this issue.
More than 40 institutional investors, 20 private equity trade associations, and a number of private equity fund managers collaborated to develop the ESG Disclosure Framework for Private Equity. This document seeks to define a set of common objectives and concerns to facilitate greater consistency in ESG disclosure processes. While not the first attempt to standardize guidance on ESG disclosure, this effort is particularly unique because of its focus on private equity and extensive industry collaboration.
The working group constructed a framework of eight disclosure objectives, five specific to fund-raising and three during the fund’s life. For each objective, the framework provides questions and specific forms of communication designed to facilitate discussion around disclosure requirements. The framework is clear that effective and relevant ESG disclosure must be defined through discussion between managers and investors in the context of specific funds.
Read about investor attitudes toward ESG issues in our ESG in Private Equity study. For more information about how the framework’s suggested forms of communication achieve its desired objectives, please contact us at info@malk.com