The Emerging Markets Private Equity Association says there is an opportunity for the private equity sector to develop a common approach to investing in the Sustainable Development Goals.
“We think of it as a bit of a call to arms,” said Shami Nissan, head of responsible investment at Actis, a growth markets specialist investing in private equity, energy and real estate. “As a private equity investor, you can move the dial much further and much more quickly.” EMPEA comprises 300+ firms representing more than $5trn.
As a member of the EMPEA’s environmental, social and governance working group’s steering committee, Ms Nissan was a contributor to the report, which offers a snapshot of where EMPEA members are with respect to the SDGs. It includes access to a database on SDG resources for private equity players, in response to interest from the membership.
The report had input from the Principles for Responsible Investment, PGGM, APG and a range of other bodies.
“We polled everyone on what the ESG working group should do and the SDGs were top of the list,” said Ms Nissan. “They wanted to know who’s doing what and why, what tools are out there to help and what other people are thinking about it.”Most members surveyed were at the stage of mapping their current portfolios onto the SDGs, working out what their investee companies were contributing to progress. This is a necessary first step towards understanding what the impact of entire portfolios might be, as well as going on to manage portfolios with the active aim of increasing that impact.
The report stops short of pointing to examples of best practice, because the area is so new that it is continually evolving. The risk, according to Ms Nissan, is that too many different concepts and frameworks are being used, leaving would-be investors none the wiser as to which manager might be creating the greatest impact.
“The path to success is actually collaboration,” she said. “We need to create a standard, a framework.”
Ms Nissan also had a word of warning for private equity managers leaping to view their portfolios through an SDG impact lens: “You can’t really aspire to doing things to support the goals if you’re not doing meaningful and rigorous risk management, in the form of traditional ESG integration.”
Meanwhile, Carlyle, the Nasdq-listed private equity giant with $201bn under management, says it is now carbon neutral. The firm added that it is in the process of hiring a dedicated Chief Diversity Officer. Its 2018 corporate citizenship report is here.