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Invest Europe ESG Reporting Guidelines

Setting the industry standard for ESG reporting

B1 Invest Europe ESG Guide1

It is undeniable that sustainable investing is becoming more important worldwide. The many benefits are clear, and the question is not whether or not to invest in sustainable assets, but how much you should be investing in them. Across industry and government alike, leaders of all kinds are increasingly aware of how important it is that ESG performance improves. The emphasis given to ESG by each and every firm in our industry matters and will be under the spotlight. Headline risk for firms with poor ESG credentials has grown significantly in recent years, and window dressing will not be enough to overcome public scrutiny. We are now seeing that strict regulatory requirements are taking the place of, or are being added on top of, voluntary reporting schemes to ensure that private firms do their part, creating both challenges and opportunities.

It is not only regulators that are looking for clear ESG disclosures. Investors are more and more looking to funnel their money into sustainable investments. And this is not just an ethical decision, as ESG funds in Europe are being seen as a way to outperform the market, providing a clear opportunity for firms that take ESG seriously. At the same time, institutional investors, due to different types of regulation and/or demand from beneficiaries, boards, society, etc. are obliged to do consolidated ESG reporting (which may differ from one investor to another) covering their entire portfolio. As a lot of institutional investors report timely and to the general public, ESG reporting must be of high quality.

For the private equity and venture capital (PE/VC) industry, there is a clear need for greater transparency of the firms’ ESG practices and strategy, and the impact of both the firms themselves, and their portfolio of investments, on “people and planet”. Increased sustainability reporting will allow investors to track companies’ performances and have a better understanding of their potential future value beyond current financial performance.

These Invest Europe ESG Reporting Guidelines will ensure that investors, and to a certain extent other stakeholders, are able to understand the GP’s approach to sustainability and, for each relevant fund, the main impacts of its investments on relevant sustainability factors.

This voluntary guide has been put together with the help of industry practitioners (GPs, LPs1, advisers and portfolio company experts) in various jurisdictions across the EU and beyond, and based on a number of industry surveys, to ensure that the reporting recommendations reflect not only current market practices and the realities facing practitioners, but also the expectations and needs of investors. In preparing these Guidelines we have aimed to create the most advanced and user-friendly guidance on sustainability reporting in the European private capital sector. GPs who commit to report in accordance with these Guidelines will be reporting in accordance with industry-wide recognisable practice.

These Guidelines should be considered alongside the Invest Europe Investor Reporting Guidelines, and should be regarded as effective for reporting periods beginning on or after 1 January 2023.

As jurisdictions and international bodies are largely still in the process of reviewing and/or completing their reporting obligations, our Guidelines will develop over time and further updates are anticipated.

1. The terms General Partner, GP or manager, and Limited Partner, LP or investor are used interchangeably throughout this guide.

Caveats
  • These Guidelines are intended as a tool. The use of the Guidelines, including the reporting template, is voluntary.
  • These ESG Reporting Guidelines are intended primarily to be of use to European firms. It is recognised that they may not be appropriate for asset managers who have global activities and as such are subject to rules in other jurisdictions or have chosen other reporting formats.
  • These Guidelines are not intended to cover all EU or national legal and regulatory reporting requirements, but they are designed to be consistent with them rather than duplicative.
  • Users of the Guidelines should take their own legal and regulatory advice to ensure that they are compliant with applicable laws and relevant legal obligations.
  • As with most aspects of their relationships, the managers of private capital funds and their investors negotiate the required sustainability disclosures in their funds on a bilateral basis during the fundraising process. As such, it is not the intention that these Guidelines should in any way restrict the disclosures made and information transferred especially where that information flow is already established. However, these Guidelines are designed to assist in the negotiations and form a clear and strong baseline level of information flow on a regular basis.
  • These Guidelines do not cover information to be included in the fundraising documents, annual investor meetings, meetings of the LP Advisory Committee (“LPAC”) and other conference calls or ad hoc communication with investors. However, all such information should be consistent with and not contradictory to the reporting recommended by these Guidelines.
  • The main focus of these Guidelines is on ESG investing, although they sometimes also touch upon impact investing.
    • ESG investing involves an investment approach that integrates ESG factors into corporate conduct, investment decisions and ownership activities – most often focusing on ESG factors that can impact the financial results of the company.
    • Products under the EU SFDR that are classified as Article 8 (promoting environmental and/or social characteristics) are generally considered to make such investments.
    • On the other hand, impact investments are made with the aim of generating a measurable positive social and environmental impact, alongside a financial return. Impact investments focus on what companies do and seek to contribute positively to solutions through the allocation of capital to companies that will provide a positive environmental or social impact.
    • Products under the EU SFDR that are classified as Article 9 (products investing exclusively in sustainable investments) are considered to make impact investments.
Acknowledgements

Invest Europe would like to thank the following members of the ESG Reporting Guidelines Working Group for their valuable input during the development of the Guidelines (in alphabetical order per firm):

  • Robert Sroka, Abris Capital Partners
  • Advent International
  • Maaike van der Schoot, AlpInvest Partners
  • Anders Strömblad, AP2
  • Jessica Peters and Fabian Söffge, Argos Wityu
  • Leslie Kapin, Astanor Ventures
  • Nathalie Medawar and Viviana Occhionorelli, Astorg
  • Susanne Røge Lund, ATP Private Equity Partners
  • Megan Starr, Carlyle
  • Alessandra Patera, DeA Capital Alternative Funds
  • Patricia Volhard and John Young, Debevoise & Plimpton
  • Gabriella Rocco, Energy Impact Partners
  • Lizzie Stazicker, Exponent Private Equity
  • Mia Sørli and Rebecca Svensøy, FSN Capital Partners
  • Nora Schulte, GENUI
  • Wolf Heselich and Christian Schütz, Golding Capital Partners
  • Shantanu Naravane and Heike Schmitz, Herbert Smith Freehills
  • Lucia Mancisidor, Hermes GPE
  • Caroline Löfgren, Hg
  • Ivo Dimov, Intermediate Capital Group
  • Serge Younes, Investindustrial Advisors
  • Sarmad Naim, IQ-EQ
  • Joy Nkosi, Andrew Probert, Julianne Recine, Hannah Rossiter and John Ward, Kroll
  • Jack Probert, former intern at Kroll
  • Aamil Ghani and Natalia Neuman, Lakestar Advisors
  • Kim Woehl, Montagu Private Equity
  • Jessica Bederoff Stenvad and Elin Ljung, Nordic Capital
  • Judy Cotte and Danielle Pal, Onex
  • Oliver OBryan, Partners Group
  • Emile Symons, PMV
  • Amara Goeree, Schroders Capital
  • Robert Carroll, Sofinnova Partners
  • Silva Dezelan, Stafford Capital Partners
  • Suzanne Tavill and Bhavika Vyas, StepStone Group
  • Isabelle Combarel, Renaud Serre-Lapergue and (formerly) Cyprien Leroux, SWEN Capital Partners
  • Filippo Cardini and Abrielle Rosenthal, TowerBrook Capital Partners
  • Travers Smith

Mapping of voluntary frameworks and standards

Member only

ESG KPI report

The Invest Europe ESG KPI Report is the first annual ESG and sustainability data survey to track the industry’s efforts in tackling issues such as climate change, female under-representation and bribery and corruption.

Member only

GP ESG Due Diligence Guide

This revised GP ESG Due Diligence Guide provides an overview of actionable steps and tips on how GPs can integrate ESG factors into their investment decision-making and management process – ranging from (i) pre-investment screening and due diligence, and (ii) addressing material ESG risks and opportunities during the ownership period, to (iii) monitoring and reporting processes.