Private fund managers are turning down LPs’ requests for ESG data when these seem immaterial or are too resource-intensive to collect.
Investment firms’ heads of ESG told delegates at PEI Group’s Responsible Investment Forum in San Francisco last week that despite the past year’s fundraising slowdown giving LPs more influence, there are LP requests for which GPs “have latitude to push back”. The conference was held under Chatham House rule, meaning speakers’ comments could not be attributed to them.
One fund manager’s ESG head reported receiving a request for 120 key performance indicators. “We have latitude to push back against that because [although] it’s free for our LPs to ask, it’s not free for us to collect,” they said. “We don’t collect this many KPIs. And by the way, I’m not sure that you have 120 key performance indicators.”
Another ESG head said they declined to share their EDCI results with LPs: “We have to push back against those requests simply because we don’t even know what we’re going to do with that data. We have one year of data for some companies. This year, we’re going to set targets and identify areas of improvement across all of our majority control investments. So for now, we will not share that information [on portfolio companies’ ESG performance] but in the next couple of years, it’s to be expected that we will share that information.”
Another firm was asked for its portfolio companies’ carbon footprints. The GP counts a healthcare company among its investments. “As a deal team member, I like the orthopaedic surgeons to be focused on hip replacements and ACL repairs and not tracking down electricity bills from their landlords,” the firm’s ESG head said.
The head of ESG at another firm disagreed with this approach, however. “As an investor, our mandate isn’t just to help these companies grow. It’s also to get our investors the data that they need,” they said. Moreover: “I think about the long-term impact of a lot of ESG initiatives. As an investor, we are accountable for helping build platforms for the next buyer. We sometimes have to switch our mindset to not just think about what this data point is doing for the business tomorrow, but what it is doing for the business in five-, 10- or 20-years’ time.”