A large majority (88%) of private equity investors said they are aiming to intensify efforts to manage and measure ESG performance in their portfolio – but nearly half (46%) have concerns over greenwashing accusations if they were to use their own ESG scoring methodologies.
According to a study by Intertrust, the biggest challenges to implementing ESG programmes at a portfolio company level were identified as “quantifying and monitoring their impact; cost and resource constraints; and managing multiple sources of ESG data.”
The research also revealed that GPs predict that it could take up to five years to produce standardised data across their portfolio companies.
“GPs are expanding their measurement of ESG behaviours within each of their portfolio companies due to investors seeing correlations between excess returns, sustainability, diversity and equality, to name a few,” said Chitra Baskar, global head of funds at Intertrust.
“Although support grows for the Principles of Responsible Investment (PRI), regulators have yet to agree on independent reporting standards. Without these standards, private equity remains subject to greenwashing accusations. This pressure underlies GPs support for their portfolio companies and their ESG impact reporting,” she added.
Intertrust conducted the research in April 2020, which included 143 responses from private equity fund managers in Asia, Europe and North America.
© 2020 funds global asia