A survey by Edinburgh-based investment giant Aberdeen Standard Investments has found that ESG engagement by European firms is "strong" while their North American counterparts are "lagging behind".
The survey was sent to 176 General Partner (GP) across Europe (60), North America (82) and Asia (34) with an overall response rate of 52% which is in line with last year. 70% of European GPs responded to the survey. Respondents of the survey were given an overall ESG rating according to their responses.
ESG remains an important consideration for GPs in Europe, with a consistent number of respondents achieving a Green rating in 2019, the survey showed. More than half of the respondents implemented at least one positive ESG change in the year.
The general trend suggests that private equity firms are regarding ESG as increasingly important, with firms based in Europe leading the way"
More than half of respondents reported having taken meaningful action in relation to ESG, including carbon offsetting, reduced air travel and reducing reliance on single use plastics.
"The general trend suggests that private equity firms are regarding ESG as increasingly important, with firms based in Europe leading the way," said Merrick McKay, head of European Private Equity, Aberdeen Standard Investments.
However, North America is falling behind their European and APAC counterparts.
"ESG engagement in North America is lagging behind Europe and Asia Pacific and we will follow up with those GPs who either didn't respond or who scored poorly relative to their peers. ESG remains a core component of our investment philosophy and is incorporated into our diligence and monitoring processes," commented McKay.
Also, less than one third of general partners (GPs) surveyed are a formal signatory of the UN's Principles for Responsible Investments (PRI), UN Global Compact or similar, or are considering becoming a signatory. Furthermore, 39% have no plans to sign up currently.
The survey, now in its fifth year, aims to monitor the current level of engagement at both the General Partner (GP) and underlying portfolio company level.