ESG Considerations during Fundraising

ESG strategy integration is fast becoming an issue of value protection and creation alongside investor value alignment. Limited Partners (LPs) expect private equity firms to integrate environmental, social, and governance (ESG) considerations into the investment process, from due diligence to exit.  

Where to start

RPS has the expertise and experience to help clients establish clear ESG policies and implementation frameworks that enhance relationships with current and potential LPs, satisfy expectations, and help firms secure access to funding. 

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Why ESG

With recent accelerations in the rate of commitments to ESG policies from private equity peers and increasing requirements around ESG reporting, meeting LPs’ ESG expectations is no longer just a differentiator for private equity firms, but a critical step in securing access to capital. 

The drivers behind the implementation of ESG are growing beyond investor preference and peer pressure to business case recommendations for sustainable considerations. Investment in sustainable funds in the US more than doubled from 2019 to 2020, and between January and April 2020, 88% of sustainable funds outperformed their non-sustainable counterparts. 

As investment in and performance of sustainable funds begins to outstrip that of non-sustainable counterparts, investors are beginning to recognize that sustainable strategies correlate with resilience and do not require a tradeoff on returns. ESG policy implementation is therefore becoming a responsible fiduciary decision, which LPs are looking for from the fundraising stage. 

Firm-level ESG policies

An ESG policy should resolve uncertainty and maximize adaptability. Private equity firms need flexible ESG policies that are specific enough to demonstrate accountability, outline specific commitments and resources, and address LP expectations.  

An effective ESG framework is implemented through existing firm structures to integrate into existing processes and procedures more easily and extend beyond simply meeting governance requirements. Strong policies will facilitate education and awareness in investment professionals, operating teams, and support staff to ensure that commitments and capacity are met, maximizing portfolio credibility. 

Our approach

RPS works through policy creation, implementation guidance and support, development of customized resources and tools, and training to provide customized firm-level ESG programs designed to meet and stay on top of constantly changing external and internal stakeholder expectations. Specifically, we help our clients: 

  • Identify LP motivations, expectations, and goals 
  • Clarify an internal ESG-related vision, mission statement, priorities, and expectations 
  • Create an ESG policy and implementation strategy that addresses stakeholder needs 
  • Provide tailored ESG training and implementation programs to educate internal executives and staff, and clarify misconceptions about ESG 
  • Prepare firm for fundraising meetings and coach investor relations representatives 
  • Highlight value within the current portfolio by identifying existing companies that can benefit from ESG 

Tailored ESG Solutions

Our experienced specialists evaluate what approach will work best for a specific firm and work within existing structures to identify elements of an ESG program already covered by existing elements of the firm’s business model and address any remaining gaps, reducing unnecessary new processes and procedures. RPS also supplies training, including onboarding and ongoing education to ensure internal team members are kept up to date on external stakeholder expectations, internal programmatic requirements and resources, and other industry trends. 

With the in-house expertise to ensure that ESG commitments extend to a private equity firm’s portfolio companies, we provide bespoke firm-level implementation frameworks that ensure effective implementation beyond fundraising and throughout the investment cycle, creating short and long-term value across your portfolio and strengthen your firm’s reputation. 

How we can help

Contact us to discuss how to integrate ESG considerations into the fundraising process.

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