Data & Intelligence
EMPEA ESG Community Case Studies: Alignment with the SDGs
- Actis Case Study
- Denham Capital Case Study
- Elevar Equity Case Study
- ECP Case Study
- GEEREF Case Study
- Investisseurs & Partenaires Case Study
- TVM Capital Case Study
The U.N. Sustainable Development Goals (SDGs or Global Goals) provide a global framework for addressing the most urgent global social and environmental challenges. They set out a pathway to inclusive growth and represent a call to action for the private and public sectors as well as civil society. The private sector has a critical role to play in achieving the SDGs, and private equity (PE) investors are in a unique position to invest in and influence businesses in a manner that creates positive change. Given that success in delivering the SDGs hinges on the economic growth and progress of developing countries, emerging markets (EM) investors can be particularly influential.
Interest in SDGs and PE in Emerging Markets
The EMPEA ESG Community expressed an interest in understanding how to approach to the SDGs through the lens of private equity in emerging markets. An SDG Working Group was formed to lead the development of a report that would provide guidance to general partners (GPs) and limited partners (LPs) actively investing in emerging markets. A wide variety of PE firms, as well as the broader industry that supports and enables PE investment, recognize the significant opportunities that the SDGs provide for new investments that deliver bigger and more demonstrable development impact.
Current Industry Practice
PE investors are increasingly dedicating time and effort to engagement with the SDGs, and there is a wide variation in ambitions and approaches to the integration of SDGs across individual firms. Amongst PE investors that are most actively engaged with the SDGs, common practices include mapping existing investments to SDG targets; assessing the magnitude of contribution to the SDGs that PE funds can credibly claim; and exploring investment strategies that specifically aim to achieve SDG targets.
Investors face common challenges when engaging with the SDGs given the breadth of the SDGs, underlying targets and key performance indicators (KPIs), both which are set at a national level and may not translate easily to a specific investment. This report also identifies a range of additional challenges that require attention, including attribution of impact, ‘additionality’ and net impact.
Looking beyond current general practice, this report identifies specific opportunities for EM PE funds to deliver important outcomes across key SDG themes, including affordable and clean energy, health care, education, gender equality and decent work. However, seizing these opportunities will require innovative thinking, partnerships and collaboration with non-governmental organizations (NGOs), peers and regulators. Delivering on the SDGs will also require funds to think differently about their role, as well as collaborate across the PE asset class to define appropriate and applicable KPIs, common and agreed upon approaches to attribution of impact and reporting to stakeholders. Without this cooperation, the huge potential that PE firms have in aggregate to make a meaningful difference regarding the SDGs will be limited by scale and implementation inefficiencies.
Call to Action
This report concludes that:
- PE has the potential to drive change at scale and speed. Investors in emerging markets can deliver more meaningful impact in markets which are chronically underserved, not least because their investment strategies often mirror the SDGs.
- LPs will increasingly select fund managers that show credible commitment to the SDG agenda.
- There is now an opportunity for the PE industry to collaborate and build consensus with the goal of developing a common approach to ‘investing in the SDGs’.
In addition to this report, EMPEA compiled a compendium of SDG case studies contributed by EMPEA ESG Community Members and a companion database of resources.
Renuka Ramnath | Founder, Managing Director & Chief Executive Officer, Multiples Alternate Asset Management Private Limited
Brian Lim | Partner and Head of Asia and Emerging Markets, Pantheon Ventures
David Rubenstein | Co-Founder and Co-Executive Chairman, The Carlyle Group
Dr. Andrew Kuper | Founder and CEO, LeapFrog Investments
Torbjorn Caesar | Senior Partner, Actis
Drew Guff | Managing Director & Founding Partner, Siguler Guff & Company