Key Takeaways from the March 2023 PEI Responsible Investors Forum
Earlier this month, we enjoyed a quick trip to New York for the PEI Responsible Investment Forum. It was great to connect with clients and industry leaders in person! We heard from several of our clients and their peers on ESG reporting considerations, portfolio company engagement, deal team collaboration, the regulatory outlook, and societal perceptions of our industry permeating national headlines. It was exciting and inspiring!
Among the observations shared, a few themes stood out to us:
It was unanimous – ESG isn’t going anywhere.
There is no such thing as bad publicity. Garnering media attention and eliciting backlash on the national stage means that our collective awareness is being raised, bringing ESG considerations front and center. The media tend to suggest that critics abound, but for each critic there are myriad proponents. The focus on ESG is being both sharpened and amplified. The value we create is here to stay.
Standardization or customization?
Efforts to standardize reporting for improved efficiency and scaled benefits, including benchmarks, stood at odds with interest in tailored metrics dependent on portfolio company industry or GP or LP priorities. Everyone wants the process to be easier – there are too many surveys and bespoke metrics – but not necessarily at the expense of attaining decision-useful ESG data.
Internal ESG resources remain scarce.
GPs and portfolio companies commented on the breadth and depth of data collection sought. They shed light on the herculean efforts and bandwidth (or lack thereof) required to accurately respond to data requests and effectively address action plans. LP/GP priorities and GP/portfolio company activities of greatest impact are not always aligned.
In certain cases, efforts to improve efficiency in the name of enhanced ESG performance on the part of the portfolio could result in wildly inefficient allocation of resources, not to mention placing an undue burden on a company that would rather direct those resources to more impactful activities core to their business (materiality is in the eye of the beholder).
The bottom line
LP/GP engagement with GPs/portfolio companies is fundamental to elevating ESG efforts that create real value. Connecting the team on the ground with those who consistently have a seat at the table can lead to more successful outcomes.
At Reporting 21, our team is ready to guide you through this tumultuous and exhilarating time for our industry. Our collective wealth of ESG and impact expertise can be deployed to help you tackle these and other challenges across your entire investment lifecycle.
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In a recent interview with Private Equity International, Reporting 21 senior consultants discussed ways the market has evolved in the last five years stating, “Large private markets investors feel they can no longer ignore ESG. There was still an opt-out five years ago, but now it has become essential for fundraising, with lots of questions being asked about how ESG is integrated into the investment life cycle. There is an ESG section in every fundraising deck.”