ESG - Where Do LPs Really Shake Out?

Increased investor attention on ESG considerations is yet another trend that has accelerated as a result of the pandemic as well as a multitude of other events that hardly need to be detailed here.

A quick barometer of this increased attention is a look at the average number of times “ESG” is mentioned in PPMs we have received in any given year. Unsurprisingly, Europe continues to outpace North America meaningfully in this regard.

Average ESG PPM Mentions
By Year PPM Received

We recently surveyed our clients and partners, asking them to assess the importance of ESG to their investment strategy. While this is a snapshot in time and does not provide a look at how this has evolved, you can see how ESG is very much a developing and/or current focus.

How Important is ESG to your Investment Strategy?

Notably, a larger contingent of LPs rank ESG as a low priority compared to GPs. You could argue that makes sense given that GPs are catering to a broader set of interests than a single LP. Still, it’s interesting to note that GPs appear slightly ahead of LPs, based on this survey at least, in terms of thinking about ESG.

Within the LP group, we asked which of the three components of ESG was the primary focus. Roughly half noted governance, with the rest almost evenly split between social and environmental. We polled our GP group to understand how often they are asked about their ESG initiatives.

What percentage of your LPs request your information on ESG initiatives?

The responses surprised us. More than one-third report that less than a quarter of LPs ask.

What do we make of this? We’ll say what investors hate to hear: Lots of talk and a lot less action from the LP side.

Nevertheless, we’ll make a prediction: ESG will become one of the most important considerations for both LPs and GPs over the next five years.

Disclosures

This presentation is not an offer to sell, or a solicitation of any offer to buy, any security or to enter into any agreement with Hamilton Lane or any of its affiliates. Any such offering will be made only at your request. We do not intend that any public offering will be made by us at any time with respect to any potential transaction discussed in this presentation. Any offering or potential transaction will be made pursuant to separate documentation negotiated between us, which will supersede entirely the information contained herein.

Any tables, graphs or charts relating to past performance included in this presentation are intended only to illustrate the performance of the indices, composites, specific accounts or funds referred to for the historical periods shown. Such tables, graphs and charts are not intended to predict future performance and should not be used as the basis for an investment decision.

The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice, or investment recommendations. You should consult your accounting, legal, tax or other advisors about the matters discussed herein.

As of February 16, 2021