SETTING NEW ESG REPORTING STANDARDS  

Investment consultant Albourne has launched a new Environmental, Social and Governance (ESG) framework for Alternatives (including both Hedge Funds and Private Markets). This initiative is supported by Border to Coast Pensions Partnership (Border to Coast), one of the largest public sector pension pools in the UK.

With a Private Markets investment program expected to grow to over £5bn in the next 12 months, Border to Coast is concerned at the lack of robust and consistent ESG standards in Private Markets.  It is therefore supporting Albourne as it develops a framework based on the recommended due diligence questions (DDQs) set out by the United Nations-supported Principles for Responsible Investment (“PRI”).

Albourne is taking a multi-tiered approach and has just launched:

  • Anew questionnaire based on the PRI framework (replacing Albourne’s ESG DDQ originally launched in 2011);
  • Anew Albourne proprietary short form questionnaire; and
  • A new proprietary ESG scoring framework (based on the above short form questionnaire).

Albourne is rolling out the above approach for all the alternative investment managers it is engaged with.  Managers are invited to complete the questionnaires on Albourne’s manager portal, MoatSpace.

Border to Coast Chief Investment Officer, Daniel Booth said: “While ESG reporting has improved in public markets, there is a clear need to enhance standards, transparency and how we measure ESG risk, opportunity and performance in Private Markets. Albourne has a successful track record of implementing improvements on behalf of investors and we are delighted to work with them to enhance ESG reporting.”

Albourne’s Chief Executive Officer, John Claisse said: “Reporting around ESG is important and at Albourne we strive to change the view that ESG in the context of due diligence is just a ‘nice to have.’  We urge investors and managers alike to be thoughtful in their approach to ESG issues.”

The new scoring framework will cover three areas:

  • Policy and Governance;
  • Investment Process and Monitoring; and
  •  Reporting

The output will be a numerical score out of 100 which aims to enhance standards and transparency in the Alternatives industry.

Emlyn Palmer, Head of ESG Investing and Partner at Albourne, who leads the firm’s ESG initiatives, said: “Today, the game changer is that investors are increasingly looking at ESG factors as investment risk factors. Incorporating an ESG scoring framework helps encourage managers to not only meet minimum acceptable standards, but to raise industry standards overall. We anticipate a robust adoption rate by managers. In August 2020, we launched a new diversity and inclusion questionnaire, in partnership with the Alternative Investment Management Association and in just eight months received responses for more than 2,000 funds.”