According to a new study by Intertrust, an overwhelming majority (88%) of private equity investors plan to step up their efforts to manage and measure environmental, social and governance performance in their portfolio companies over the next two years.
But almost half (46%) are concerned that by using their own ESG scoring methodologies they leave themselves open to accusations of ‘greenwashing’.
General partners highlighted the three biggest obstacles to implementing ESG programmes at a portfolio company level as quantifying and monitoring their impact; cost and resource constraints; and managing multiple sources of ESG data.
Underlining the complexities involved in the process, GPs predict that it will take over five years before they can produce standardised ESG data across their portfolio companies.
According to Intertrust, this will put the onus on tech-enabled service providers to deliver flexible solutions that can provide independent ESG assessments and benchmarks as well as offer GPs flexibility in adhering to different standards that are constantly changing.
The Channel Islands are specialist centres for servicing PE and the islands’ financial services firms work with some of the world’s biggest PE managers.
Intertrust’s head of funds in Guernsey, Kees Jager, said that the islands’ experience in the funds space would ensure provision of a high-quality service when advising and implementing ESG programmes for clients around the world.
‘We’ve seen a steady increase in the number of ESG measures being put in place by our clients. The Channel Islands has proven expertise as a fund servicing jurisdiction.
‘This combined with the technological advancements we’ve made and our team of experienced fund professionals means we can implement the ESG solutions private equity professionals are looking for,’ he said.
Intertrust, a global leader in providing tech-enabled fund and corporate solutions, interviewed around 150 private equity fund managers across Europe, North America and Asia to identify the risks and opportunities facing the private equity industry in the coming 12-24 months.
While the majority (54%) of respondents believe they will ultimately benefit from a greater focus on ESG over the coming two years, a sizeable minority (32%) were pessimistic about what they will receive in return.
Moreover, only 27% believe that the coronavirus will lead to a greater focus on ESG investing as the role of business in society comes under increasing scrutiny.