Resources

Overview:

No matter where your firm is on the ESG adoption curve, an ESG policy document has become not only a requisite component of the data room, but also an opportunity to clearly articulate your

1) Purpose

2) Priorities, and

3) Processes

for serving as a force for good in the face of compounding ESG-related risks.

A well-crafted policy should communicate the ESG principles that your firm has committed to upholding, as well as its plan for integrating sustainable policies, practices and reporting into its operations and investing. We have found that transparency around your action plan will help your brand resonate more deeply with stakeholders, and we strongly encourage that you provide detailed insight into your ESG implementation and measurement strategies.

To help our clients bring their ESG policies forward, we have conducted a broad survey of existing policies, responsible investing guidelines, and ESG sustainability
reports across the Private Equity and Venture Capital industries, documented in Appendix A (page 14), and spoken with numerous investment managers about their ESG policy experience. Based on our industry analysis, we have both developed general recommendations for incorporating these three key components (Purpose,Priorities, and Processes) into your own policy, and drafted an illustrative policy document for Example Capital Partners to serve as your guide.

ESG Policy Components:

When crafting your firm’s policy, you
should aim to:

1. Demonstrate your values (Purpose)

Recommendation:

What’s your firm’s credo? What are you known for? The more personal and unique, the better. Explain the high-level values that drive your firm’s ESG Policy. Compelling value statements will connect ESG principles with your firm’s existing investment strategy, culture, and unique expertise. If your firm has undertaken any ESG-related initiatives prior to formalizing your ESG policy, you can highlight those here.

Example(s):

“We create value by seeking out talented management teams and providing them the resources they need to execute. Together we can develop solutions that promote sustainable communities and a healthy planet.”

“We’re on a mission to build the most prosperous, sustainable, and inclusive technology ecosystem in North America.”

“As a global financial services organization, we must meet the needs of our diverse stakeholders. We understand that our business can and should be engaged in activities that promote a positive influence in the world.”

“We are committed to developing a culture that engages with ESG issues, promoting sustainable operating procedures across our portfolio”
 

How Green Project Can Help:

Our team has substantial experience advising investment firms as they craft ESG policies. Because this section speaks to your firm’s unique values and priorities, there is no “one size fits all” response, but we can help you tailor your language to reflect your firm’s level of ambition for its ESG program.

2. Center on 3-5 key native ESG principles of the firm (Priorities)

Recommendation:

This section should explain the specific issues your firm will focus on within the broad universe of “ESG.” Given your firm’s value statement (1), select 3-5 key ESG principles phrased as qualitative commitments, that logically arise from your firm’s values and investment niche.

The principles need not be original to your firm. For guidance selecting appropriate principles, we recommend reading PRI's. If possible, identify principles that, in addition to supporting your ESG values,
will also reduce exposure to material ESG risks.

Example(s):  

“We are building a workplace culture that celebrates and values each individual member of our team”

“We are deploying private capital to develop innovative, affordable solutions for low-carbon desalination”

“We are committed to reducing our Greenhouse Gas emissions across our portfolio, in line with SBTi’s “Business Ambition for 1.5°C”.

How Green Project Can Help:

Materiality is becoming increasingly important for every business. With clients across Private Equity, SaaS, Fleet Management, and other sectors, Green Project has experience identifying material ESG risks, and crafting appropriate policy principles. All principles should aim to be straightforward, actionable, and objective. We understand that businesses and GPs have found it challenging to account for indicators accurately and have developed tools to help track and report on relevant KPIs, namely Scope 1-3 carbon emissions and social and governance data in compliance with leading private equity ESG frameworks. We also understand that this is a confusing space, and if helpful, we would be happy to help disentangle best practices and serve a sounding board throughout your process.
 

3. Describe the execution and implementation approach undertaken to
activate principles (Processes)

Recommendation:

From deal sourcing and decision-making to ownership and exit, explain how and at what points these ESG principles are integrated into your firm’s processes and practices. Explain which metrics are tracked and reported, and to whom. Explain key ESG councils and groups tasked with maintaining and reviewing quality (i.e., ESG deal team member, Board member advisory council). Help your stakeholders understand the extent to which ESG is considered, adopted, and audited for the long-term success of your strategy.

Example(s):

“We will collect impact performance data from portfolio companies regularly, including team diversity”

“We include ESG considerations into our portfolio operations checklist at onboarding, and construct an ESG risk matrix, as well as actions for mitigations, for each investment.“
 

How Green Project Can Help:

We have the breadth and depth of tools available to help your
team begin the exploration of integrating ESG. As your firm selects the most
material ESG elements, we would be happy to provide and build additional add-on
tools to support you in your journey.

This need not be a daunting process. We recommend taking an iterative, non-disruptive approach when crafting an ESG policy—you can and should revisit this policy regularly as your priorities and procedures change. To support your ESG growth, Green Project has developed the software-based tools you need to track meaningful data points and report to key stakeholders. We are always happy to discuss your firm’s unique needs and outline common approaches we have seen in the market.

If we can help with further questions about constructing an ESG policy guide, or support you on the next steps in your ESG journey with ongoing data management and reporting, please reach out to our team.