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ESG in Private Equity Part 1: UN PRI & Related ESG Reports and Ratings

Davis Polk is following the development and evolution of environmental, social and governance (“ESG”) frameworks by various organizations that are being employed by private equity general partners and limited partners. This article, covering the Principles for Responsible Investment’s ESG Guidance for Private Equity trilogy issued in full on June 13, 2018, is the first item in our series. Our next article will describe the related United Nations Global Compact ESG principles and its use and relevance in private equity. Our third article will discuss the United Nations Sustainable Development Goals, seventeen cutting-edge principles which the investment community is beginning to incorporate.
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ESG in Private Equity: What Every GP Needs to Know About Public Pension Fund Requirements

Public pension funds have long been outspoken advocates of environmental, social & governance (ESG) principles in investing. As quasi-public institutions uniquely sensitive to public opinion and the political process, public pension funds have begun to incorporate ESG considerations into all asset classes in their portfolio, including their private equity investments. With public pension fund limited partner (LP) investments constituting 44% of total worldwide private funding by the top 100 LPs in private equity, the largest category of private equity LP type by far among this group, it is important that private equity firms understand the ESG expectations of public pension funds and assess on an ongoing basis whether their ESG policies and practices, and those of their portfolio companies, are responsive.
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SASB Releases ESG Disclosure Standards: Public Companies and Private Equity Industry Take Note

The Sustainability Accounting Standards Board (SASB) released this Monday its draft standards for Environmental, Social and Governance (ESG) disclosure, launching a 90-day public comment period which ends on December 31, 2017. These standards set forth ESG topics covering 11 different sectors and 79 industries for public companies to disclose annually.

The draft standards, over four years in the making, were created by SASB working groups open to the public, including registrants, investors and service providers to public companies. The 90-day public comment period provides registrants and other stakeholders another opportunity to shape these disclosure frameworks before they are finalized. This opportunity is important as certain observers expect these standards will have some meaningful uptake.
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