Partners Group
January 28, 2021
Partners Group is a leading global private markets investment manager with over USD 109 billion in assets under management and more than 1500 professionals across 20 offices worldwide.

Integrating ESG holistically in private equity

This case study, part of a report from the Sustainability Accounting Standards Board (SASB), outlines how Partners Group navigates the ESG ecosystem, and how our approach has been shaped by key principles, frameworks, and industry standards shaping ESG, responsible investment, and impact integration. To demonstrate the practical application of these concepts, the case study examines our direct equity investment in EyeCare Partners, the largest vertically integrated medical vision services provider in the US, which we acquired in December 2019 on behalf of our clients. While this case study will focus specifically on SASB, UN PRI, IMP, and the UN SDGs, the Task Force on Climate-related Financial Disclosures (TCFD) framework is also an important tool in our ESG toolbox. As an eyecare services platform, climate change is not a high-materiality consideration for EyeCare Partners, however, the TCFD framework has helped to shape our broader climate change strategy, which is especially relevant for our industrial and infrastructure investments.

 

Due Diligence

To put the UN PRI’s Principle 1 into action - “incorporate ESG issues into investment analysis and decision-making processes" - SASB Standards are useful when identifying material ESG considerations. Specifically, Partners Group has developed a proprietary ESG assessment tool employed by investment teams across our private equity, infrastructure, real estate and debt investment teams. Using SASB Standards, the tool identifies the most material ESG topics for a target investment by automatically flagging the most relevant SASB disclosure topics and metrics based on the target’s industry and sector. Investment teams use these SASB disclosure topics and metrics as a roadmap for ESG due diligence.

The due diligence process for Partners Group’s investment in EyeCare Partners demonstrates how this tool works in practice for direct equity investments. EyeCare Partners is the largest vertically integrated medical vision services provider in the United States. Under SASB’s classifi­cation, the company falls within the healthcare sector and healthcare delivery industry. Based on SASB Standards for this industry, our ESG assessment tool flagged the most material SASB disclosure topics for the company, such as patient privacy, employee retention, and pricing transparency.

Guided by these disclosure topics, our investment team worked with an external ESG due dili­gence provider to evaluate EyeCare Partners’ performance by collecting data on specific SASB metrics tied to each disclosure topic. This data helped the investment team to form a view on ESG risks and value creation opportunities, which they outlined in the investment memo for consideration by Partners Group’s Global Investment Committee.

 

Active Ownership

Post-acquisition, Partners Group's approach to ESG integration is aligned with UN PRI Principle 2, to be “active owners and incorporate ESG issues in…ownership policies and practices.” For Partners Group, this means systematically identifying and executing strategic, KPI-linked ESG value creation and protection opportunities for all direct lead investments. As in due diligence, we use SASB’s Standards to operationalize UN PRI’s Principle 2 during ownership.

For example, during due diligence, we identified two high-priority ESG topics for EyeCare Partners: (1) employee recruitment, development and retention and (2) data security. During ownership, Partners Group’s ESG & Sustainability team will work closely with our investment and Industry Value Creation teams, and in partnership with company management, to strengthen performance on these topics. We have already begun the process of onboarding management to our ESG approach, identifying opportunities for action, and executing quick wins. For example, we have implemented an upgraded HR Information System and are working closely with management on a broader effort to enhance employee benefits to increase retention.

 

Conclusion

This case study demonstrates how ESG standards and frameworks can be used during the investment process, from defining a firm’s commitment to responsible investment to shaping the ESG due diligence process to measuring performance and impact during ownership. Our approach is one example of how private equity investors can adapt these standards, frame­works, and principles to complement their specific responsible investment strategies. Whatever approach investors take, the first step in using these tools is to understand what each offer before incorporating them into the relevant investment activities.

 

You can read the full case study on our website:

https://www.partnersgroup.com/en/news-views/in-the-media/detail/article/sasb-integrating-esg-holistically-in-private-equity/ 

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