Investors have increased their focus on Environmental, Social and Governance issues. This panel focused on the compliance role in ESG.
According to a poll at the conference, about half of the attendees have a written ESG policy and consider ESG as part of their strategy. There is the balance between wanting to invest for good and to invest for returns. There is a larger push to just block investments in particular areas such as tobacco, pornography, arms manufacturers, etc.
Investors are specifically asking for a written ESG policy. The policies have a great deal of discretion. Investors often do not have specific requirements for the substance of the ESG policy. Investors want to know that you are thinking about these issues.
Fund limited partners are reporting their ESG goals, or at least those issues they are most interested in, as part of their reporting. So they are expecting their funds to report on these issues. The challenge is that investors are asking a wide range of questions on a wide range of issues. It’s a challenge to gather the disparate data and put together quantitative numbers.
The #MeToo issue is a current hot topic. Fund managers are pushing down to their portfolio companies to implement ESG policies, as well as implementing them at the fund manager.
Compliance can help by doing what compliance does: drafting policies, implementing procedures to effectuate the policy, and track the data in the implementation.
There are many ways to approach ESG, pick one and try it out if you haven’t yet. Get someone in senior management to sponsor the effort. It’s not just about being a treehugger, it’s about creating value in your portfolio companies and value in your fund management.
(This session was subject to the Chatham House Rule so I have not identified the participants and have not attributed any of the statements to anyone.)