European private equity body teams up with institutional investors on ESG guidance

APG and PGGM feed into new guidance for €564bn market

European private equity and venture capital trade group Invest Europe has teamed up with institutional investors to develop an environmental, social and governance (ESG) questionnaire to provide a “clear framework” for assessing ESG factors at investee companies.

Officials from Dutch giants PGGM and APG were involved in a working group that developed the new guidance – called the ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies. The European private equity market is worth around €564bn in total.

The initiative was spearheaded by Invest Europe’s Responsible Investment Roundtable, which is chaired by Marta Jankovic, Senior Sustainability and Governance Specialist, Head of ESG Integration Alternatives at APG Asset Management. She said not all portfolio companies “are on the same page when it comes to ESG factors”.

“Laying out all the essential questions, it gives fund managers a clear framework for assessing ESG factors at the companies they own or plan to invest in,” Invest Europe, the former European Private Equity & Venture Capital Association (EVCA), says.

APG and PGGM are both among Invest Europe’s c.650 members. Other members include fellow Dutch investor MN alongside global players such as the Canada Pension Plan Investment Board, BT Pension Scheme Management, the Ontario Teachers’ Pension Plan, the Pension Protection Fund, PensionDanmark, the Ireland Strategic Investment Fund, Storebrand Asset Management and Tredje AP-Fonden (AP3).The preamble to the questionnaire says it is “not supposed to be a tick-box exercise” – rather its aim is to assist firms (“general partners” or GPs) to “identify risks, improvement opportunities and good practices”.

The questionnaire covers areas such as environmental impact, health and safety processes, human rights and labour standards.

Jankovic added: “The more we can help fund managers and investors identify the potential issues and opportunities in the investment process, the more we can promote high ESG standards across the board.” In September, Brussels-based Invest Europe, headed since October by former Citigroup executive Michael Collins, released a guide for pension funds to its industry.

Invest Europe’s UK peer, the BVCA (British Venture Capital Association), has been running Responsible Investment Awards since 2011 (Disclosure: Responsible Investor is a media partner). This year’s awards went to Hermes GPE, KKR, Northedge Capital and Bridges Ventures at BVCA’s annual summit in London last month. Beth Houghton, Partner at Palatine Private Equity, won the award for outstanding individual contribution.

Next on the agenda for Invest Europe is Invest Week, a series of events focused on the European investment and growth agenda. It kicks off on November 28 and has the support of European pensions body PensionsEurope, funds group EFAMA and Eurosif.