Five Steps for PE Sponsors to Establish ESG Policies at Their Portfolio Companies to Suit the Present Moment

Pick up the annual report of many major corporations, growth companies and pooled investment funds, and chances are that somewhere it will contain a reference to three initials that have become a critical part of their messaging: E, S and G. The fact that environmental, social and governance (ESG) concerns have earned a globally recognized moniker reflects investors’ expanding focus on the impact that companies have on people and the planet. The trend is not new, but it has migrated from adoption by values-based investors, once considered eccentric, to a mainstream concern. PE sponsors have responded to that demand by launching funds with ESG and impact investing strategies. Another level of effort is warranted beyond investing in companies with good ESG practices, however, and that is to enhance ESG efforts at all companies affiliated with the PE industry. Through their ownership stakes in companies and exceptional levels of influence, PE sponsors are uniquely positioned to aid their existing portfolio companies with adopting ESG policies to chart a socially responsible path forward. In a guest article, Hughes Hubbard partners Bryan Sillaman and Alexandra Poe discuss the ESG landscape and provide five steps for PE sponsors to consider when establishing effective ESG programs at their respective portfolio companies. For more on impact investing, see “Survey Gauges Global Trends in Impact Investing, Anticipates Continued Growth Despite Pandemic” (Sep. 15, 2020); and “PELR Program Explores Current Issues and Trends in Impact Investing” (Jul. 16, 2019).

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