Environmental & Social (E&S)

Environmental and Social (“E&S”) compliance and best practices are important for the sustainable operations of Private Equity investees. Fund managers will often require external resources to: i) establish internal procedures at pre-investment level and for post investment monitoring; and ii) assist investees at the portfolio level to establish and maintain E&S action plans.  The resources below, will help fund managers as they navigate E&S requirements at the fund and portfolio level.

Business Case

The business case for Sustainability and why investors should care about E&S Standards and Procedures is rooted in overall financial performance.  A number of studies looking at the relation between companies’ environmental, social, and corporate governance practices (ESG) and their financial performance, find that the vast majority of them find a direct link: companies that do good by the environment, their labor force, and communities, do well financially. IFC recently looked at the performance of 656 companies in our portfolio and found that companies with good E&S performance tend to outperform clients with worse environmental and social performance by 210 basis point (BPS) on return on equity (ROE) and by 110 bps on return on assets (ROA.).  The links below provide more on the business case and IFC’s eight Performance Standards and Policies.

 
E&S Management System

Environmental and social (E&S) risks to financial institutions stem from E&S issues related to their client's/investee's operations. Considering these risks in the transaction review process helps financial institutions in reducing overall risk exposure.  Here are some resources to help establish an E&S Management System (ESMS) for the fund as well as for investee companies.

 
E&S Due Diligence

E&S risks to financial institutions stem from E&S issues related to their client's/investee's operations. Considering these risks in the transaction review process helps financial institutions in reducing overall risk exposure.

 
ESMS Toolkit

The ESMS Toolkit - General provides tools — checklists, templates, and forms — to help you implement your ESMS improvement plan.

 
BVCA Responsible Investment Toolkit

Walks through the key components of a Responsible Investment (RI) management framework.

Governance

IFC Corporate Governance Toolkit

A toolkit comprising matrices, checklists and others – tailored for governance needs based on company size (listed company, Family-owned, funds, small business, etc.).  It also includes guidance on the development of a matrix to capture a company’s current governance framework and identify how the company is performing in each of the six areas of governance (Commitment to Good Corporate Governance, the Board of Directors, Control Environment and Processes, Transparency and Disclosure, Shareholders Rights, and Governance of Stakeholder Engagement) to four levels of achievement.

EVCA Corporate Governance Guidelines

Guidelines and good practice  in the management of privately held companies in the private equity and venture capital industry

PWC Corporate Governance Toolkit developed for CPA Australia

The Corporate Governance Toolkit focuses on the practical application of governance principles for small and medium enterprises and provides straightforward guidance.