Sustainability Report 2018
TOWARDS A SUSTAINABLE FUTURE - Sustainability Report 2018

Fund of Funds

Actively engaging with GPs

We are the world’s biggest investor in secondary Fund of Funds assets, with a portfolio of $51bn, as well as being a major provider of primary capital to General Partners around the world. As such, we have close links with more than 200 GPs, mainly in Europe and North America.

The scale and importance of our activities in Fund of Funds give us a unique position in these markets as well as the responsibility – as a signatory of the UN PRI and a supporter of the ESG Disclosure Framework – to monitor ESG performance and promote best practice. We have responded by developing a proprietary framework for assessing ESG performance among our GPs. We believe this results in the most comprehensive assessments of this sort carried out by any private investment manager in the world.

Since 2011, we have been gathering information from GPs using a self-completed questionnaire comprising more than 40 questions, and use the results to score each GP on a scale of 1 to 4 stars. We examine each GP both in terms of their investment practices and their application of ESG principles as a company.

This results in two main outputs: a regular ESG benchmark for our entire Fund of Funds portfolio in aggregate, for us to see how its ESG characteristics are evolving; and an individual ESG scorecard for each GP that completes the survey, highlighting best practices and areas for improvement.

Number of GPs who participate in our annual ESG campaigns:

“We have very powerful levers to disseminate best practice”

Benoît Verbrugghe
Head of Ardian US, Head of Investor Relations and Member of the Executive Committee, discussesthe Fund of Funds team’s approach to working with GPs to improve ESG performance

Benoît Verbrugghe: We’ve been monitoring our GPs’ ESG practices for seven years now and we’re clear that ESG integration is here to stay – the trends are positive everywhere and particularly in the US, both in terms of investment activities and among GPs at the corporate level. ESG is becoming mainstream because investors understand that sustainable, long-term growth is possible only if we properly address ESG consideration issues, both to manage risks and create value.

As an investor in Fund of Funds, we have a role to play in ensuring our industry’s growth is sustainable and we have very powerful levers to disseminate ESG best practice across our community of 200-plus GPs.

If we see the ESG performance of our portfolio getting better, it is also because we strive to select GPs with good ESG practices and those willing to work on improving their per formance. We asses s ESG factors systematically during our due diligence for all transactions, and for primary investments the results account for 10% of the final investment decision, demonstrating the impor tance we place on sustainability.