A survey by Aberdeen Standard Investments (ASI) has found that ESG engagement in private equity firms is increasing.
Results showed continued strong ESG engagement across Europe and an improvement in quality from Asia Pacific (APAC). Private Equity firms are clearly increasingly aware of issues such as climate change and are responding with action such as carbon offsetting and reducing their reliance on single-use plastics. Only 38% of firms surveyed however, are signatories of UNPRI, UN Compact or similar. Results also show that Firms based in North America appear to be lagging behind their European and APAC counterparts.
The survey, now in its fifth year, aims to monitor the current level of engagement at both the General Partner1 (GP) and underlying portfolio company level. The survey was sent to 176 GPs across Europe (60), North America (82) and APAC (34) with an overall response rate of 52%. Respondents of the survey were given an overall ESG rating2 according to their responses.
The following relates only to Private Equity firms based in Europe4
Merrick McKay, Head of European Private Equity, Aberdeen Standard Investments, commented: “The general trend suggests that Private Equity firms are regarding ESG as increasingly important, with firms based in Europe leading the way. There’s still scope for improvement in terms of their ability to measure and monitor against key ESG-related metrics and this is something that we will be encouraging during our discussions with GPs. We are optimistic looking at results from firms based in Asia Pacific, with a number of respondents having implemented initiatives in the last year to improve ESG performance. ESG engagement in North America is lagging behind Europe and Asia Pacific and we will follow up with those GPs who either didn’t respond or who scored poorly relative to their peers. ESG remains a core component of our investment philosophy and is incorporated into our diligence and monitoring processes.”
1 The term General Partner refers to a Private Equity firm
2 Ratings were assigned by ASI based on GP’s responses according to the following definitions:
3 United Nations Sustainable Development Goals
4 GPs were asked ten questions. The survey included responses from European, North American and Asia Pacific Private Equity companies. Given the relative nascence of ESG in North America and APAC, GPs in those regions were asked only the first five questions.
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