Navigating ESG issues during the private fundraising process
Categories of ESG side letter provisions
Acknowledgment of investor's ESG policies
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Example: Adviser acknowledges that it has read investor's internal ESG policies, which often are attached as an
exhibit to the side letter
Agreement to take into account certain widely recognized ESG frameworks
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Example: Adviser acknowledges that it is a signatory to the UNPRI, UN Global Compact Principles or IFC
Performance Standards and in some cases agrees to consider such principles when making investment
decisions
Representations and covenants regarding adviser's ESG policies
Example: Adviser makes reps as to its own policies and/or undertakes to encourage fund's portfolio companies to
pursue certain ESG-related goals (e.g., diverse board membership)
Reporting/notices
Example 1: Adviser agrees to provide regular reporting on ESG metrics at the portfolio company level.
Can be driven by regulatory requirements (e.g., SFDR) or commercial factors
Example 2: Adviser agrees to notify investor of material changes to ESG policies or negative ESG-related
incidents
Opt-out rights
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Example: Adviser agrees to excuse investor from participating in fund investments in oil / gas sector
ROPES & GRAY
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