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Asian private equity managers lack sustainability engagement

Only a quarter of firms would consult with their limited partners to align with their sustainability priorities.
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Although many Asian private equity (PE) managers are taking significant steps to integrate ESG issues into their investment processes, only a quarter of them engage with their limited partners on sustainability issues, according to a report from Mayer Brown and Sedgwick Richardson.

Sustainable Private Equity in Asia also found less than a third of managers surveyed had a sustainability strategy in place other than the firm’s overall approach.

Commenting on the result, Mayer Brown said this creates opportunities for PE managers to outshine their peers.

“Our analysis indicates that there are continuing integration opportunities for managers to employ structured stakeholder engagement to more clearly highlight their advanced ESG priorities, and to build capacity, which can improve value creation and financial outcomes at exit,” said Mark Uhrynuk, corporate and securities partner at Mayer Brown.

“Unified sustainability strategies that address multiple topics can better meet stakeholder expectations, help manage risks, enhance brand equity and create value,” he said.

Only 15% of the companies surveyed have developed sustainability strategies that address multiple topics in a unified manner and even fewer (9%) of the PE managers have made sustainability core to their brand strategy.

This suggests that many managers are missing opportunities to better address stakeholder expectations, manage risk and create value with clearly articulated, comprehensive sustainability propositions integrated into firm level branding, the report said.

Sustainability strategy refers to a set of guidelines that determines which topics a manager focuses on in both the investment process and its own operations, as well as the positive outcomes that the manager hopes to achieve for the economy, environment and society.

The report reviewed 28 PE managers headquartered in Asia, including mainland China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, South Korea and Vietnam and all of them have committed to the Principles for Responsible Investment.

Late last year, Redington’s annual Sustainable Investment Survey also found that asset managers are falling short of delivering on their climate engagement strategies when compared with their firm-wide commitments.

According to an earlier survey by Schroders, climate and biodiversity are the most prioritised engagement issues for southeast Asian investors.

This story first appears on our sister publication, ESG Clarity.

Part of the Mark Allen Group.