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Introduction
In Q3 2023, Morrison Foerster, in association with Asian Venture Capital Journal (AVCJ), surveyed 100 Asia-headquartered fund general partners (GPs) with USD$1 billion+ assets under management (AUM) to gain their insights on how environmental, social, and governance (ESG) considerations are impacting their investments and the market.
Using the findings from our regional survey, we have designed this tool to help you benchmark where your fund is on its ESG journey and what steps you need to take to catch up or keep up with the fast-moving changes in ESG.
The survey should take no more than five minutes to complete. You will receive an auto-generated assessment to give you an indication of where you are on your ESG journey. The responses to your questions will be kept anonymous.
Contact Information
Name
Company
Email address
Section 1 - Fund Manager Level
Please select the option that best describes the internal structure of your organization in relation to managing ESG.
We have C-suite/senior management personnel solely dedicated to ESG matters who have binding decision-making powers with respect to operations and investments.
We have C-suite/senior management personnel solely dedicated to ESG matters who are only able to make recommendations for operations and investments.
We have C-suite/senior management personnel who oversee ESG along with other matters.
We have an ESG committee that does not include C-suite/senior management personnel and solely oversees ESG matters.
We have a committee that oversees ESG and other matters.
None of the above.
Section 1 - Fund Manager Level (Continued)
What good governance or compliance practices and policies do you already have in place at fund level? (Select all that apply.)
Anti-money laundering
Anti-corruption
Code of ethics
Compliance with sanctions
Data privacy compliance
Data security
Labor practices
Vendor and service provider know your customer (KYC)
Other (please state)
Section 1 - Fund Manager Level (Continued)
Please select the option that best fits how you enforce these policies:
We have strict policies, and all staff and management are trained, aware, and strictly required to comply with policies in their activities.
We have policies in place but are not very strict about compliance; everyone just knows that we prioritize them.
We do what is required by laws and regulations.
We are in the phase of designing our policies on these issues and are still figuring out what it means for us and our business.
None of the above.
Section 1 - Fund Manager Level (Continued)
Is your investment team compensation linked with the achievement of ESG goals or targets in your organization?
Yes.
No, but we are planning to in the future.
No.
Section 2 – Investment to Portfolio Management and Exit
Are you using ESG criteria to select potential investment targets/potential portfolio companies?
Yes, but it would not make or break our decision.
Yes, it would influence our decision.
No.
Section 2 – Investment to Portfolio Management and Exit (Continued)
Deal Selection
To what extent do you select investments because the portfolio company has positive ESG credentials?
We always invest in companies with positive ESG credentials.
We sometimes invest in companies with positive ESG credentials.
Positive ESG credentials are not essential in our selection process.
Section 2 – Investment to Portfolio Management and Exit (Continued)
Pre-Investment Due Diligence
Do you conduct separate ESG due diligence or is it part of your standard due diligence?
We conduct separate ESG due diligence.
ESG is part of our standard due diligence.
It depends on the deal.
We do not conduct ESG due diligence on deals.
Section 2 – Investment to Portfolio Management and Exit (Continued)
Pre-Investment Due Diligence (Continued)
What specific areas are included in your ESG due diligence? (Select all that apply.)
Climate
Diversity, equity, and inclusion (DEI)
Labor practices
Anti-corruption and anti-bribery
Sanctions
Data privacy and security
Other (please state)
Section 2 – Investment to Portfolio Management and Exit (Continued)
Investment Documentation
Which of the following do you include in investment documents? (Select all that apply.)
Adoption of an ESG compliance framework and policy as a condition precedent to the investment
Establishment of an ESG-related committee or specialized team within the portfolio company as a condition precedent to the investment
Specific covenants by the portfolio company to remedy issues identified through ESG diligence
Veto rights over material ESG matters
Regular ESG key performance indicator (KPI) reporting/disclosure
Specific exit or other rights in the event of material ESG issues
Section 2 – Investment to Portfolio Management and Exit (Continued)
Portfolio Management
Do you have a green claims vetting and substantiation policy agreed with your portfolio companies
Yes, and we require third party verification of such claims.
Yes, and we require portfolio companies to provide guarantees that the claims are true to the full extent of what is communicated
Yes, but we only require portfolio companies to make ESG or green communications where possible and no more
No, we do not have any policies on ESG communications or green claims by our portfolio companies.
Section 2 – Investment to Portfolio Management and Exit (Continued)
Portfolio Management (Continued)
Is your organization committed to reporting on ESG compliance about the following areas in respect of your portfolio companies? (Select all that apply.)
Yes, we do this on a regular basis (e.g., monthly or quarterly).
Yes, but we only do this occasionally / ad hoc.
Yes, but we only do this when there is a request.
No, but we are planning to do this in the future.
No.
Climate metrics
Diversity, equity, and inclusion (DEI) metrics
Labor practices
Anti-corruption and anti-bribery
Sanctions
Cybersecurity and privacy
Section 2 – Investment to Portfolio Management and Exit (Continued)
Exit
Have you made any divestments/exits from an investment because of material noncompliance with ESG-related issues in the past 24 months?
Yes, we have.
No, we have not.
Results
Thank you for talking our short survey. Here is the assessment of where you are along your ESG journey and how you are doing in navigating the ESG maze compared to the rest of the market.
On the starting blocks
On the way
Making progress
Leading from the front, but the end point keeps moving
You are at the start of your ESG journey, with probably a small number of internal policies and commitments in place, as well as a relatively low-level allocation of resources and personnel to attend to ESG issues. You will need to be poised to rapidly improve your ESG performance to keep up with your competitors as other GPs in Asia are rapidly increasing their focus on ESG. ESG is complex and includes many aspects. Choose a few aspects of ESG and try to do them very well and then move on to others.
You are on your way on your ESG journey but you are struggling to navigate the maze of ESG considerations and to convert policy into action. You need to start making binding commitments and setting smart ESG goals backed by internal structures and financial commitments to achieve ESG success within your organization.
You are well on your way on your ESG journey but you need to consider following a more holistic approach and allocating equal and consistent priorities to ESG compliance within your organization. You cannot be complacent because many GPs in Asia are quickly moving ahead on ESG goals. You need to take note of competitors that are ahead of you on their journey and be prepared to react swiftly to what is coming next over the ESG horizon.
You are advanced in your ESG journey compared to your peers. However, this is an increasingly evolving field and you cannot afford to stop innovating on how best to define what ESG means for your organization and how to design ESG policies. Limited partners and regulators are continuously raising the bar for ESG policies and their implementation.
How the MoFo Team Can Help You
The MoFo team works closely with many funds in Asia on their ESG commitments and fully integrates advice on making and meeting ESG goals in its representation of GPs in private equity investments and acquisitions. We are here to help you with all aspects of your ESG journey including advice, training, and insights. Please visit our
ESG Report
,
ESG
, and
Private Equity
resource centers or contact us at
ESG@mofo.com
to find out more.
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