North America lagging Europe on ESG engagement, says Aberdeen Standard survey

Tree-lined highway

ESG engagement by European firms is "strong" while their North American counterparts are "lagging behind", according to a new survey by Aberdeen Standard Investments. 

The survey, now in its fifth year, aims to monitor the current level of engagement at both the GP and underlying portfolio company level. 

The survey was sent to 176 GPs across Europe, North America and APAC with an overall response rate of 52 per cent. 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.

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.

“There’s still scope for improvement in terms of their ability to measure and monitor against key ESG-related metrics and this is something that we will be encouraging during our discussions with GPs. We are optimistic looking at results from firms based in Asia Pacific, with a number of respondents having implemented initiatives in the last year to improve ESG performance,” continued McKay. 

Only 38 per cent of firms surveyed are signatories of UNPRI or UN Compact, however. Less than one-third of GPs surveyed are a formal signatory of similar principles or are considering becoming a signatory - 39 per cent have no current plans to do so.

Results also showed that firms based in North America appear to be lagging 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.

Over 80 per cent of firms indicated that they promote diversity initiatives and encourage diversity at a portfolio company level, though many are yet to establish monitoring procedures.