Worldfavor at the Responsible Investment Forum 2022
On November 16-17, the Responsible Investment Forum took place in London. The conference is one of the biggest events that discusses ESG issues across alternative asset classes, bringing together fund managers, institutional investors and expert advisors to discuss the key themes: the role of ESG value creation, climate and impact investment. Worldfavor was there to learn from industry experts, listen to interesting panel debates and participate in interactive workshops and networking opportunities.
Here are our key takeaways from the Responsible Investment Forum:
- ESG should be a bottom-up approach for investors, and an ESG strategy should be embedded in the business strategy to build purpose and value creation for portfolio companies. Therefore, it is important that portfolio companies understand why ESG is crucial to future-proof their businesses. Today, investors are engaging more with their portfolio companies to drive change and make better investments.
- While ESG used to be voluntary, there has been a shift towards ESG being crucial for businesses. Regulations such as SFDR, CSRD and TCFD are putting GPs and LPs under pressure, but meeting regulatory demands is not the only factor driving ESG to the top of the agenda – understanding and values are key. Stakeholder demand, operational efficiency, innovation boosts, risk mitigation and long-term value creation for portfolio companies are further pushing the ESG urgency onto investors.
- ESG data enables the possibility to set actionable ESG targets and provides valuable insights to act on them, but sometimes, the data needed is unavailable. At portfolio level, the lack of resources and knowledge can result in poor data quality and data collection being more time-consuming than required. This results in the challenge of using and making sense of a vast amount of data.
- Regarding ESG metrics, PEs use more of the quantitative kind. It’s important to identify the most relevant metrics, as well as gaps in the reporting and to feed these gaps into each portfolio company’s action plan. In comparison, VCs, investing in early stages, play an important role in educating and setting a foundation for their portfolio companies on ESG. This helps to future-proof the companies for coming fundraising.
In summary, ESG should be embedded in the overall business strategy. It’s important that portfolio companies understand why ESG is so crucial, and investors carry a responsibility to create engagement related to this. Furthermore, PEs should set action plans based on quantitative data, while VCs should instead focus on setting the foundation for future-proofing companies.
Photo by Ian Tuttle