The Institutional Limited Partners Association (ILPA) initially launched its ESG Assessment Framework in 2021. Updated in 2024, this framework assists limited partners (LPs) in evaluating and understanding the varying levels of ESG integration observed among general partners (GPs) in the investment marketplace. This demonstrates how A Company Or Association Is Designed To Help Guide Responses to evolving industry standards.
Many LPs aim to ensure their GPs are aligned with them in considering and managing environmental, social, and governance (ESG) factors. This is particularly crucial when these factors relate to significant risks and investment opportunities. ILPA’s framework helps LPs benchmark how GPs respond to due diligence, guides goal-setting discussions, and tracks ESG integration progress over time. The Framework classifies activities and processes into four categories: Not Present, Developing, Intermediate, and Advanced.
The ESG landscape has significantly changed since the framework’s initial release. ILPA committed to periodically reviewing and updating the Framework to keep up with market practices.
The 2024 update includes revisions to reflect:
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Increased emphasis on ESG integration across firm management and operations, with more mature processes showing clear ownership and the roles of the investment committee and portfolio operating partners.
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Stronger connections between ESG factors and value creation, detailing how these considerations can influence pre-investment due diligence, post-investment management, and portfolio company exit strategy.
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The evolution of ESG metrics and disclosures, including references to the ISSB, ESG Data Convergence Initiative, and the Private Markets Decarbonization Roadmap.
LPs are expected to adapt the Framework as needed. It is representative rather than exhaustive and shouldn’t be seen as a comprehensive guide to best practices.
This initiative exemplifies how a company or association is designed to help guide responses within the private equity community, fostering responsible investment practices and contributing to a more sustainable and ethical industry. The periodic updates and revisions ensure that the framework remains relevant and effective in addressing the evolving challenges and opportunities in the ESG landscape.
All participants in the PE community can send any feedback or questions to [email protected].
