A new environmental, social and corporate governance (ESG) framework has been launched to better evaluate and understand ESG risks in relation to private equity investment.
The framework has been developed to help general partners (GP) better understand why limited partners (LP) want ESG information, and what information is relevant, according to Local Government Super (LGS).
The framework provides guidance on the disclosure of unexpected events that might pose reputation risks to a GP, LP, or portfolio company, and helps LPs understand practical and legal obstacles, stated LGS.
It also articulates objectives for LPs seeking more structured ESG disclosures within private equity investments and helps GPs disclose information, enabling LPs to meet their ESG disclosure objectives.
Head of sustainability at LGS, Bill Hartnett, told InvestorDaily LGS supports the framework, calling it a "significant development" for private equity.
"ESG risks can be material risks and if anything else, they're even more material in private equity and illiquid investments, where transparency is low and you're required to hold the investments for the long term," he said.
"It is about getting better transparency, understanding and dialogue going on between managers and asset owners."
The framework will be used by LGS to assist assessment of current and future investments across its private equity portfolio.
