Private Equity Council Adopts Stricter Investment Guidelines

    Industry News | February 10, 2009
    The Private Equity Council today announced that its members have adopted a set of comprehensive responsible investment guidelines that they will apply prior to investing in companies and during their period of ownership. The guidelines cover environmental, health, safety, labor, governance, and social issues.

    The guidelines call for PEC member firms to:

    1. Consider environmental, public health, safety, and social issues associated with target companies when evaluating whether to invest in a particular company or entity, as well as during the period of ownership.

    2. Seek to be accessible to, and engage with, relevant stakeholders either directly or through representatives of portfolio companies, as appropriate.

    3. Seek to grow and improve the companies in which they invest for long-term sustainability and to benefit multiple stakeholders, including on environmental, social, and governance issues. To that end, Private Equity Council members will work through appropriate governance structures (e.g., board of directors) with portfolio companies with respect to environmental, public health, safety, and social issues, with the goal of improving performance and minimizing adverse impacts in these areas.

    4. Seek to use governance structures that provide appropriate levels of oversight in the areas of audit, risk management and potential conflicts of interest and to implement compensation and other policies that align the interests of owners and management.

    5. Remain committed to compliance with applicable national, state, and local labor laws in the countries in which they invest; support the payment of competitive wages and benefits to employees; provide a safe and healthy workplace in conformance with national and local law; and, consistent with applicable law, will respect the rights of employees to decide whether or not to join a union and engage in collective bargaining.

    6. Maintain strict policies that prohibit bribery and other improper payments to public officials consistent with the U.S. Foreign Corrupt Practices Act, similar laws in other countries, and the OECD Anti-Bribery Convention.

    7. Respect the human rights of those affected by their investment activities and seek to confirm that their investments do not flow to companies that utilize child or forced labor or maintain discriminatory policies.

    8. Provide timely information to their limited partners on the matters addressed herein, and work to foster transparency about their activities.

    9. Encourage their portfolio companies to advance these same principles in a way which is consistent with their fiduciary duties.

    The guidelines grew out of a dialogue between PEC members and a group of the world’s major institutional investors, which took place under the umbrella of the United Nations-backed Principles for Responsible Investment (PRI).

    “Private equity is all about investing for growth and maximizing returns to our investors. To accomplish that today requires considering a range of environmental, governance, human capital, and social issues,” says Private Equity Council President Douglas Lowenstein. “Today’s announcement explicitly and formally affirms PEC members’ commitment to fully integrating these responsible investment guidelines into both our pre-investment and post-investment processes.”

    PRI Executive Director James Gifford says: “A year ago, we reached out to the private equity sector, including the Private Equity Council, to launch a dialogue on how best to address environmental, social and governance (ESG) issues in line with the PRI Principles.

    “Today’s announcement by the PEC that its members have adopted these comprehensive guidelines on responsible investment marks a major step forward in our efforts to elevate ESG issues at all companies, public and private. We are pleased that the PEC has committed to meeting with us twice annually to have a sustained dialogue on these guidelines and ESG issues."

    Ted Eliopoulous, Interim Chief Investment Officer of the California Public Employees Retirement Systems (CalPERS), says: “We signed onto PRI because we believe that encouraging policies and practices that help create a better society for this and future generations is an excellent way to maximize our investment returns. As a limited partner in many PEC members’ funds, we know that private equity has not only generated positive returns for our beneficiaries but has also been a positive force in building stronger, more competitive companies."

    News and information presented in this release has not been corroborated by WTWH Media LLC.