Applying 'Deep ESG' to Asian Private Equity

16 Pages Posted: 21 Apr 2020 Last revised: 21 Aug 2020

See all articles by Frederick J. Long

Frederick J. Long

Olympus Capital Asia, Hong Kong

Syren Johnstone

Faculty of Law, University of Hong Kong; Asian Institute of International Financial Law

Date Written: February 12, 2020

Abstract

At this stage of Asia's development there is a need, and an opportunity, to establish a validation methodology that better gauges levels of ESG implementation and sustainability aspirations in Asian private equity. Private equity, along with major public market and debt managers such as Blackrock, has adopted language that suggests a proactive approach to ESG management. Membership in UN PRI is one notable example of such proaction among private equity investors. But, at present, talk exceeds action and process-oriented ESG compliance far outstrips honest measurement of ESG baselines and any aim to pursue investments that tangibly contribute to SDG goals. A taxonomy of common approaches to ESG investment practices in Asian private equity is presented and their shortcomings described.

This article proposes "Deep ESG" as a market-led methodological framework that better operationalizes ESG and sustainability metrics. Deep ESG aims to help Asian private equity managers to express a higher level of transparency and intentionality with regards to ESG and sustainability, informing institutional investors, regulators, communities and employees as they evaluate private equity's overall "balance sheet" of sustainability impacts. By investing in tools for measurement and evaluation, fund managers and their portfolio companies become part of this important dialogue with stakeholders and help shape constructive solutions to ESG challenges. Deep ESG has the potential to drive capital allocation in a more ambitious and commercially compelling direction to solve urgent sustainability goals.

Keywords: Private Equity, Asia, ESG, Environmental, Social, Governance, SDG, Sustainable Development Goals, Deep ESG, Sustainable Investment, Impact Investment, Sustainability

Suggested Citation

Long, Frederick J. and Johnstone, Syren, Applying 'Deep ESG' to Asian Private Equity (February 12, 2020). University of Hong Kong Faculty of Law Research Paper No. 2020/021, Available at SSRN: https://ssrn.com/abstract=3562096 or http://dx.doi.org/10.2139/ssrn.3562096

Frederick J. Long

Olympus Capital Asia, Hong Kong ( email )

Hong Kong
Hong Kong

Syren Johnstone (Contact Author)

Faculty of Law, University of Hong Kong ( email )

Faculty of Law, Pokfulam Road
Pokfulam
Hong Kong
Hong Kong

HOME PAGE: http://www.law.hku.hk/academic_staff/syren-johnstone/

Asian Institute of International Financial Law ( email )

Faculty of Law, Pokfulam Road
Pokfulam
Hong Kong
Hong Kong

HOME PAGE: http://www.law.hku.hk/academic_staff/syren-johnstone/

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