Hermes launches into RI private equity advisory space with PRI hire

Hermes Equity Ownership Services (HEOS), the London-based corporate governance specialist, is starting a specialist team to advise private equity investors on how to improve environmental, social and governance (ESG) standards. The fund manager has appointed Tom Rotherham as an advisor to the new team. Rotherham is known to many investors as the joint co-ordinator over the last two years of the United Nations Principle for Responsible Investment’s drive to sensitise private equity investors on ESG issues. He was formerly head of corporate responsibility at Radley Yeldar, the business communication group. His appointment marks the first move for HEOS into private equity. It is expected to start building a small team focusing on private equity, although expected headcount has yet to be confirmed. It is understood that Rotherham will initially start researching potential ESG risks at portfolio companies at Hermes Private Equity, the sister group to HEOS. There are believed to be 25-30 private equity managers that have now signed up to the UNPRI as a result of the recruitment drive. In February 2009, some of the world’s biggest private equity firms also signed up to a set of voluntary ESG investment standards drawn up by the Washington-based US Private Equity Council (PEC). The responsible investment guidelines were created with support from some of the world’s largest pension funds and publicly endorsed by the UK’s Universities Superannuation Scheme (USS) and CalPERS andCalSTRS in the US. Members of the PEC include the biggest buyout groups in the market: Apax, Apollo Global Management, Bain Capital Partners, Blackstone, Carlyle Group, Hellman and Friedman, KKR, Madison Dearborn Partners, Permira, Providence Equity Partners, Silver Lake, THL Partners and TPG Capital (formerly Texas Pacific Group). Colin Melvin, CEO, Hermes Equity Ownership Services, said: “At HEOS we are taking a lead on behalf of institutional investors on how to implement responsible investment principles in private equity. There is a recognition amongst private equity houses that they should promote good corporate governance and sustainable value-creation amongst the companies in which they invest. By offering this service we can help in the design and implementation of their responsible ownership policies and practices.” In July 2009, the UN PRI published two documents developed by its private equity steering committee: “Responsible Investment in Private Equity: A Guide for Limited Partners” and “Responsible Investment in Private Equity: Case Studies”.
In December 2009, Hermes Private Equity launched its Environmental Innovation Fund having won £50m ($82m) of seeding from the UK Innovation Investment Fund (UKIIF), alongside commitments of £75m from Hermes’ existing client base. The fund is expected to have a first close this month of £125m.