Environmental social governance—the investment market
Produced in partnership with Tim Clare of Anthesis
Environmental social governance—the investment market

The following Environment guidance note Produced in partnership with Tim Clare of Anthesis provides comprehensive and up to date legal information covering:

  • Environmental social governance—the investment market
  • What is environmental social governance (ESG)?
  • Scope: what is included within ESG?
  • Why is ESG growing in importance?
  • Legislative drivers
  • Key ESG associations/bodies, standards and reporting frameworks
  • Benchmarks ESG disclosures and regulation on disclosures relating to sustainable investments and sustainability
  • European Green Deal
  • The Pension Fund & Private Equity example
  • ESG in practice: elements and documents

What is environmental social governance (ESG)?

Environmental social governance (ESG) is an umbrella term covering a range of environmental, social and governance factors against which the performance of a, usually corporate entity, can be evaluated. The term is closely aligned with the concept of ‘responsible investment’ and is predominantly used in the financial services sector, albeit this is slowly broadening to the wider corporate world as its implementation has increased, following the flow of investment capital.

ESG has grown in importance as financial institutions, responding to pressure from their own investors, and wider physical, market and societal drivers, have sought to evaluate their own performance and those of the funds and companies they invest in, increasingly setting performance standards and improvement targets as a condition of that investment.

This Practice Note considers ESG in the broader sense and then focuses in detail on the response of pension funds and related institutional investors (routinely referred to as the ‘Limited Partner (LP)’) and the private equity funds (the ‘General Partner (GP)’) they invest in, as an example. For information on ESG specifically in the context of sustainable loans and debt securities, see Practice Note: Global and EU sustainable finance initiatives.

Closely related, but relating to a distinct type of investing, is Impact Investment. Impact investing refers to investments made into organisations and funds with