ESG Investments and the Growth of GP Accountability to Their LPs

MoFo Perspectives Podcast

There is a growing interest in ESG-driven investments amongst Asia fund managers, with every respondent to Our Asia Funds ESG Survey 2022 stating that they take ESG criteria into account on investment decisions. However, there is a mismatch between ESG words and deeds in Asia, with many fund managers having investment policies in place that do not necessarily translate into action. This mismatch between ESG words and deeds runs a clear risk of reputational damage, compliance failure, or value decline if fund managers invest in businesses with a weak or overstated ESG record. The responsibility of GPs to get this right for their LPs is very real, and some LPs are starting to demand more reporting on how fund managers are applying ESG in practice. A number of fund managers have already responded by instigating systematic investor reporting on ESG performance, but our survey shows that these are few and far between; there’s some way to go for others to catch up. In this podcast, we explore what ESG expectations LPs have of their GPs on ESG, and how GPs are responding to increasing demands from their LPs.