European private equity puts spotlight on responsible investment

Private equity fund managers and institutional investors in Europe have joined forces to develop portfolio company-focused due diligence guidance for responsible investment, in a new initiative launched today by trade association Invest Europe.

As environmental, social and governance (ESG) considerations become increasingly important to global institutional investors, Invest Europe — the trade association for European private equity, venture capital and their investors — has published an ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies. Laying out all the essential questions, it gives fund managers a clear framework for assessing ESG factors at the companies they own or plan to invest in.

Last year, European private equity firms invested over €47 billion into almost 5,000 companies, according to Invest Europe’s data. Practising institutional investor, fund manager and service provider members of Invest Europe’s Responsible Investment Roundtable spearheaded and developed the questionnaire as a tool to facilitate due diligence, investment and enhanced ESG reporting.

“This is an industry-led initiative,” said Invest Europe’s Chief Executive Michael Collins. “Responsible investment is a critical topic for investors and private equity fund managers in Europe and this questionnaire will provide valuable guidance on how to assess and improve a wide range of ESG factors.”

The ESG Due Diligence Questionnaire covers areas such as environmental impact, health and safety processes, human rights and labour standards across a company’s operations and supply chain. It will help fund managers to identify issues requiring more detailed technical assessment, as well as opportunities to enhance value and mitigate risks following an investment.

“Not all portfolio companies are on the same page when it comes to ESG factors,” said Marta Jankovic, Senior Sustainability and Governance Specialist, Head of ESG Integration Alternatives at APG Asset Management, and Chair of Invest Europe’s Responsible Investment Roundtable. “The more we can help fund managers and investors identify the potential issues and opportunities in the investment process, the more we can promote high ESG standards across the board.”

This launch is part of Invest Europe’s commitment to maintaining high standards in transparency, accountability and strong corporate governance in the industry. Last year, the trade association updated its Professional Standards Handbook and Investor Reporting Guidelines to incorporate ESG considerations throughout the text. The trade association sets out a code of conduct for its members and also organises Responsible Investment training courses for practitioners.

Formerly called the European Private Equity and Venture Capital Association (EVCA), Invest Europe is the not-for-profit trade association representing European private equity, venture capital and infrastructure funds and their global investors. The ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies is available to download for free via its website, investeurope.eu.