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World’s biggest buyout firms sign RI guidelines

ESG private equity standards endorsed by USS in the UK.

Some of the world’s biggest private equity firms have 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, which were created with support from some of the world’s largest pension funds, have been publicly endorsed by the UK’s Universities Superannuation Scheme (USS) and CalPERS and CalSTRS 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). In a low-key meeting in New York last year hosted by the United Nations Principles for Responsible Investment, private equity companies initiated discussions on how they could meet responsible investment standards, including the question of how to apply rules to companies within their portfolios. Buyout firms have been hit by access to capital issues in the current market downturn. They have also suffered reputation issues linked to issues including their high use of leverage and question marks in somecountries over their tax arrangements. At a private equity conference in Germany earlier this month, Henry Kravis, co-founder of KKR, said the industry needed to refocus on “responsibility, transparency and, above all, trust”. KKR has hired Suzanne Donohoe, head of Goldman Sachs Asset Management International as managing director for its recent move into the fund management world via KKR Asset Management.
USS chief investment officer, Peter Moon, said: “As a long term and responsible investor trying to implement RI policies across all asset classes, we are pleased to see some of the highest profile US based PE managers signing up to a detailed set of guidelines in this area”. The guidelines call for PEC member firms to:
• Consider environmental, public health, safety and social issues when considering whether to invest in specific companies.
• Seek ways to be accessible to relevant stakeholders, either directly or through portfolio companies.
• Work with portfolio companies to improve their performance on environmental, public health, safety and social issues.
• Employ governance structures that provide for

appropriate levels of financial oversight.
• Retain the commitment to comply with national, state and local labor laws.
• Maintain strict policies prohibiting bribery of public officials, both foreign and domestic.
• Respect the human rights of those affected by their investments.• Provide timely information to their limited partners on issues associated with the responsible investment guidelines.
• Encourage portfolio companies to pursue these guidelines in a manner consistent with their fiduciary responsibilities.