Private Equity Firms Sign on to Principles for Responsible Investment

Private Equity Firms Sign on to Principles for Responsible Investment

SocialFunds.com, 13 February 2009 - The Private Equity Council (PEC), a research organization established to develop, analyze and distribute information about the private equity industry, has announced that its members have adopted a set of investment guidelines that address environmental, social and governance (ESG) issues in accordance with the United Nations' Principles for Responsible Investment (PRI).

Members of PEC include many of the world's best-known private equity firms, including Apollo Global Management, The Carlyle Group, and Kohlberg Kravis Roberts & Co. Private equity firms invest their own capital, capital from institutional investors, and borrowed money for the acquisition of both privately- or publicly-held companies.

Private equity firms then work with the management of companies in their portfolio to revitalize them. Typically, after a holding period of several years private equity firms look to sell a company at a profit, either to another corporation or to the public via an Initial Public Offering (IPO).

PRI provides a framework for incorporating ESG issues into mainstream investment decision-making and ownership practices.

The nine guidelines adopted by members of the PEC include the consideration of environmental, public health, safety, and social issues when evaluating whether to invest in a particular company; engagement with relevant stakeholders either directly or through representatives of portfolio companies; the improvement of the companies in which they invest for long-term sustainability and to benefit multiple stakeholders, including ESG issues; and the use of governance structures that provide appropriate levels of oversight in the areas of audit, risk management and potential conflicts of interest.

The guidelines also call for PEC member firms to implement executive compensation policies that align the interests of owners and management.

The PEC has committed to meeting with PRI twice annually to maintain a dialogue on the guidelines and other ESG issues, according to James Gifford, Executive Director of PRI.