New frontiers in ESG policy adoption are all around us. The private equity industry is tailoring portfolio expectations for monitoring and reporting to figures relevant to the industry, and through ongoing conversations with management rather than relying on a single, yearly check-in. The result could be a constantly updating approach to ESG metrics, say panelists at today’s PE Innovators in ESG SPEAK.
“[We’re] moving away from a model of a static impact reporting and are moving toward a living impact report,” says Vistria Group partner for impact and policy Jon Samuels, speaking on a panel concerning ESG monitoring and reporting. “We will continue with our formal annual LP impact report, but I’m going on more routine dialogues [to facilitate an] important discussion that’s evolving so rapidly.”
Vistria’s own portfolio leans heavily toward climate-light services, so its own ESG focus has been on diversity to date. Still, those evolving conversations allow for future inquiries around companies’ environmental impacts, Samuels says.
That bespoke focus is increasingly represented among PE firms that are aware that opportunities and impacts vary by portfolio company size, sector and geography.
The Sustainability Accounting Standards Board (SASB) offers a go-to framework for Apollo Global Management, says senior ESG counsel Rob Esposito. Its industry specific and materiality standards are “very useful particularly in the context of doing due diligence,” he says.
Middle-market private equity firm Monomoy Capital Partners’ focus is similarly tailored to portfolio company industry standards. Depending on the deal, head of operating team Ethan Klemperer might be speaking to teams about “getting into pollution and mitigation plans, water and waste management.”
Monitoring and standards can take different forms as long as the denominator is progress on sector-relevant metrics. See more on best practices here.