Private Equity ESG Survey - ESG ENGAGEMENT IN PRIVATE EQUITY ON THE RISE

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.

Key points

• ESG remains an important consideration for GPs in Europe, with a consistent number of respondents achieving a Green rating in 2019. Indeed, no respondents from Europe were assigned a Red rating
• More than half of the respondents implemented at least one positive ESG change in the year, with many introducing several initiatives
• Results show that North America continues to lag behind Europe and APAC
• Less than one third of GPs surveyed are a formal signatory of the UNPRI, UN Global Compact or similar, or are considering becoming a signatory. Indeed, 39% have no current plans to do so.
• There’s an increased focus on the UNSDGs³, though many GPs are looking for industry guidance on how to apply them

The following relates only to Private Equity firms based in Europe⁴

• More than half of respondents reported having taken meaningful action in relation to ESG, including carbon offsetting, reduced air travel and reducing reliance on single use plastics
• Over 80% indicated that they promote diversity initiatives and encourage diversity at a portfolio company level, though many are yet to establish monitoring procedures.

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.”

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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:

• Green: GP has a clear process in place to monitor the criteria and it is implemented across the majority of its underlying portfolio companies
• Amber: GP considers the criteria to come degree (or has plans to do so), however, it is not yet fully measured or implemented in respect to the majority of portfolio companies;
• Red: GP does not have a process in place and has no current plans to do so

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.

Ends

Media enquiries
Debbie Cowe
0131 372 1821
Debbie.cowe@aberdeenstandard.com

Notes to editors

About Aberdeen Standard Investments

• Aberdeen Standard Investments is a global asset manager dedicated to creating long-term value for our clients, and is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments. With over 1,000 investment professionals, we manage £486.5 billion* of assets worldwide. We have clients in c.80 countries supported by over 40 offices globally. This ensures we are close to our clients and the markets in which we invest. (*as of 31 December 2019)
• We are high-conviction, long-term investors who believe teamwork and collaboration are the key to delivering repeatable, superior investment performance.
• Standard Life Aberdeen plc is headquartered in Scotland. It has around 1.2 million shareholders and is listed on the London Stock Exchange.
• You can access the Aberdeen Standard Investments media centre here: https://www.aberdeenstandard.com/news-and-media
• Aberdeen Standard Investments has been a UN PRI signatory for over 100 years, recently being awarded a PRI rating of A+

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