ESG MONITORING, REPORTING AND DIALOGUE IN PRIVATE EQUITY The PRI is an investor initiative in partnership with UNEP Finance Initiative and UN Global Compact THE SIX PRINCIPLES PREAMBLE TO THE PRINCIPLES As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). We also recognise that applying these Principles may better align investors with broader objectives of society. Therefore, where consistent with our fiduciary responsibilities, we commit to the following: We will incorporate ESG issues into investment analysis and 1 decision-making processes. We will be active owners and incorporate ESG issues into our 2 ownership policies and practices. We will seek appropriate disclosure on ESG issues by 3 the entities in which we invest. We will promote acceptance and implementation of the Principles 4 within the investment industry. We will work together to enhance our effectiveness in 5 implementing the Principles. We will each report on our activities and progress towards 6 implementing the Principles. PRI's MISSION We believe that an economically efficient, sustainable global financial system is a necessity for long-term value creation. Such a system will reward long-term, responsible investment and benefit the environment and society as a whole. The PRI will work to achieve this sustainable global financial system by encouraging adoption of the Principles and collaboration on their implementation; by fostering good governance, integrity and accountability; and by addressing obstacles to a sustainable financial system that lie within market practices, structures and regulation. PRI DISCLAIMER The information contained in this report is meant for the purposes of information only and is not intended to be investment, legal, tax or other advice, nor is it intended to be relied upon in making an investment or other decision. This report is provided with the understanding that the authors and publishers are not providing advice on legal, economic, investment or other professional issues and services. PRI Association is not responsible for the content of websites and information resources that may be referenced in the report. The access provided to these sites or the provision of such information resources does not constitute an endorsement by PRI Association of the information contained therein. Unless expressly stated otherwise, the opinions, recommendations, findings, interpretations and conclusions expressed in this report are those of the various contributors to the report and do not necessarily represent the views of PRI Association or the signatories to the Principles for Responsible Investment. The inclusion of company examples does not in any way constitute an endorsement of these organisations by PRI Association or the signatories to the Principles for Responsible Investment. While we have endeavoured to ensure that the information contained in this report has been obtained from reliable and up-to-date sources, the changing nature of statistics, laws, rules and regulations may result in delays, omissions or inaccuracies in information contained in this report. PRI Association is not responsible for any errors or omissions, or for any decision made or action taken based on information contained in this report or for any loss or damage arising from or caused by such decision or action. All information in this report is provided “as-is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, expressed or implied. 2 ESG MONITORING, REPORTING AND DIALOGUE IN PRIVATE EQUITY | 2018 ACKNOWLEDGEMENTS INDUSTRY ASSOCIATIONS WORKING GROUP This guidance was developed in consultation with the The PRI and ERM are grateful to signatories on the following industry associations; the PRI warmly thanks them dedicated PRI private equity working group for their for their continued support: significant input into drafting, reviewing and editing this resource: ■ AIC (American Investment Council) ■ ■ AVCA (African Private Equity and Venture Capital Actis, James Magor Association) ■ AP2, Camilla Axvi ■ BVCA (British Private Equity and Venture Capital ■ AP6, Anna Follér Association) ■ Apax Partners, Ellen de Kreij ■ EMPEA (Emerging Markets Private Equity Association) ■ Ardian, April Tissier & Candice Brenet ■ France Invest ■ BCI, David Woodward ■ ILPA (Institutional Limited Partners Association) ■ Blue Wolf Capital, Joshua Cherry-Seto ■ Invest Europe ■ Bridgepoint, James Holley ■ LAVCA (Latin America Private Equity & Venture Capital ■ CalPERS, Liliya Kamalova Association) ■ CalSTRS, Geetika Misra ■ Capital Dynamics, Angela Willetts ■ CDC Group, Guy Alexander ADVISORY COMMITTEE ■ Cinven, Vanessa Maydon The PRI and ERM thank the PRI Private Equity Advisory ■ Coller Capital, Adam Black Committee for their oversight of this project since inception: ■ DPI, Michael Hall ■ AP2, Anders Strömblad (Chair) ■ Elo Mutual Pension Insurance Company, Karita Meling ■ Apax Partners, Ellen de Kreij ■ EQT, Therése Lennehag ■ APG, Marta Jankovic ■ First Reserve, Lauren De Paola ■ Ardian, Candice Brenet and April Tissier ■ Generation Investment Management, Sedef Koktenturk ■ Bridgepoint, James Holley ■ Government Employees Pension Fund of South Africa, Nilesh Moodley ■ CPPIB, Tammy Bodnar ■ Government Institutions Pension Fund, Cacious ■ Hamilton Lane, Ana Lei Ortiz Siboleka ■ HESTA, Joanne Saleeba ■ Hamilton Lane, Andrew Kolb ■ Harvard Management Company, Michael Cappucci ■ Harvard Management Company, Michael Cappucci ■ Oak Hill Capital, Lee Coker ■ HESTA, Joanne Saleeba ■ Pantheon, Jie Gong ■ Kohlberg Kravis Roberts & Co. L,P., Elizabeth Seeger ■ TPG, Beth Lowery ■ LGT Capital Partners, Thomas Kristensen ■ USS Investment Management, David Russell ■ MAIF, Alexandra Bestel ■ Partners Group, Shunsuke Tanahashi (Observer) ■ New Forests, MaryKate Bullen ■ New York State Common Retirement Fund, George Wong ■ NewQuest Capital Partners, Bonnie Lo ■ Ontario Teachers’ Pension Plan (OTPP), Sarah Takaki and Swee Hong Yap ■ Pantheon, Jie Gong ■ Permira, Adinah Shackleton ■ PGGM, Jelena Stamenkova van Rumpt ■ Robeco Private Equity, Silva Deželan ■ Schroder Adveq, Lee Gardella ■ The Abraaj Group, Tania Choufani ■ USS Investment Management, Helen Hopkins ■ LGPS Central, Michael Marshall 3 PROJECT CONTRIBUTORS ■ Government Institutions Pension Fund, Cacious Siboleka The PRI and ERM also thank all those who participated in ■ HESTA, Joanne Saleeba and Daniela Jaramillo the project consultation, interviews and contributed case studies to this guidance. ■ Hg, Caroline Löfgren ■ IK Investment Partners, Mikaela Hedborg and Alina ■ 21 Partners, Cristina David Benyaminova ■ Actis, James Magor ■ Independent, Alison Hampton ■ Advent International, Jarlyth Gibson ■ Kohlberg Kravis Roberts & Co. L,P., Elizabeth Seeger ■ AlpInvest Partners, Maaike van der Schoot ■ LGT Capital Partners, Thomas Kristensen and Keimpe ■ AP2, Anders Strömblad Keuning ■ ■ AP6, Anna Follér Navis Capital, Michael Octoman ■ ■ Apax Partners, Ellen de Kreij Ontario Teachers’ Pension Plan (OTPP), Jesus Arguelles and Sarah Takaki ■ APG, Marta Jankovic ■ Palatine Private Equity, Beth Houghton ■ Ardian, Candice Brenet and April Tissier ■ Pantheon, Jie Gong and Alex Scott ■ Argentum Asset Management, Jon Fredrik Vassengen ■ Partners Group, Adam Heltzer ■ AustralianSuper, Andrew Gray ■ Permira, Adinah Shackleton ■ B Lab, Flory Wilson ■ PGGM, Jelena Stamenkova van Rumpt ■ Bencis Capital Partners, Eric-Joost Ernst ■ Reporting21, Yannick Grandjean ■ Blue Wolf Capital, Joshua Cherry-Seto ■ Robeco Private Equity, Silva Deželan ■ Bridgepoint, James Holley ■ SASB, Janine Guillot ■ CalPERS, Liliya Kamalova ■ Schroder Adveq, Lee Gardella ■ CDC Group, Guy Alexander ■ SWEN Capital, Isabelle Combarel ■ Cinven, Vanessa Maydon ■ The Abraaj Group, Tania Choufani ■ ClearlySo, Lindsay Smart ■ The Carlyle Group, Jackie Roberts ■ Coller Capital, Adam Black ■ TPG, Beth Lowery ■ CPPIB, Stephanie Leaist ■ Triton, Graeme Ardus ■ CVC Capital Partners, Chloë Sanders ■ USS Investment Management, David Russell and Helen ■ EQT, Therése Lennehag Hopkins ■ Generation Investment Management, Sedef Koktenturk DEVELOPMENT OF THIS GUIDANCE The PRI and ERM have co-authored this guidance based on the input from over 60 organisations, including a range of LPs, GPs, fund of funds managers and service providers, including both PRI signatories and non-signatories. The guidance is based on interviews with more than 40 investors, desk-based research and input from the PRI Private Equity Working Group. ERM is the global market leader in the provision of Environmental. Social and Governance (ESG) support and we work with over 100 General Partners (GPs) and Limited Partners (LPs). Our 4,900 ESG professionals in 40 countries have unique blend of technical, GP, LP, lender, accounting and advisory backgrounds that allows us to provide a holistic service across the Private Equity investment lifecycle. As the largest pure-play ESG consulting firm, sustainability is the heart of the services we provide and how we operate our business. www.erm.com Contact: [email protected] and [email protected] 4 ESG MONITORING, REPORTING AND DIALOGUE IN PRIVATE EQUITY | 2018 CONTENTS FOREWORDS 6 EXECUTIVE SUMMARY 8 KEY DEFINITIONS