By Paul Davies and Michael Green
On 13 July 2017, Principles for Responsible Investment (PRI) launched guidance on incorporating environmental, social, and governance (ESG) provisions in private equity fund terms. The publication, Incorporating Responsible Investment Requirements into Private Equity Fund Terms (the Guidance), followed a year-long consultation period with PRI signatories, expert counsel, and industry associations. The Guidance aims to demystify the concept of ESG provisions, outline the terms of these provisions and work towards a consistent industry approach on this aspect of responsible investment.
The Guidance identifies current and emerging best practices, as well as possible limitations. In particular, the Guidance offers practical solutions to limited partners (LPs) and general partners (GPs) that are considering how they may integrate responsible investment into fund terms. The Guidance includes: