ESG Committee Chair
Strengthening our ESG Core
Thanks to our founders, who had the foresight to integrate ESG-related considerations into our business long before ‘ESG’ entered the investing vernacular, HarbourVest is operating from a very strong base. As a leading global GP and LP, we are well positioned – and determined – to make that foundation even stronger as ESG continues to gain traction across private markets.
With this in mind, we kicked off a multi-year, cross-company transformation effort in 2019 through which we will analyze all aspects of our ESG program and identify areas for improvement. We think of this internally as going from ESG 1.0 to ESG 2.0.
At the top of that list is addressing climate change. In many ways, awareness and acceptance of the climate crisis has parallels to where ESG was 10 years ago – growing in importance and demanding immediate attention and action. Investment managers need to have a plan that makes sense for their business, and we’re excited to have Natasha Buckley, our new head of ESG, focused on this important issue for us. Natasha will help develop our climate strategy, which will include measuring our own internal carbon footprint during 2020.
We also want to engage further with investors and GPs. We will assess current capabilities and further requirements for tracking and reporting on ESG issues for both existing funds and separately managed accounts (SMAs). Reporting continues to be top of mind for investors, and through the use of RepRisk – and our leadership on industry and fund advisory boards – we will endeavor to have comprehensive reporting. We also plan to gather ESG data on the broader industry by collecting information from any manager raising capital with whom we interact. This will give us key global insights and context to help strengthen our own portfolio.
Lastly, on the product front we are seeing exciting demand from socially responsible investors for sustainability-focused investment solutions. In most cases, these could take the form of an SMA and be tailored to the investment objectives of the investor.
We are fortunate to have such a strong ESG program in place and given the dynamic landscape of ESG in private equity, we will continue to adapt and lead from the front. We look forward to sharing future updates with you.
In many ways, awareness and acceptance of the climate crisis has parallels to where ESG was 10 years ago – growing in importance and demanding immediate attention and action.
Addressing the Climate Crisis
In its 2020 Global Risks Report, the World Economic Forum warned that climate change is striking harder and more rapidly than anticipated. In fact, for the first time in its 10-year outlook, severe climate-related threats account for the Report’s top-five global risks in terms of likelihood.
Investors are increasingly aware of their vulnerability to the systemic disruption of the risks outlined in the report, as well as their role in catalyzing the decarbonization of the global economy and investing in climate-resilience. In just the last six months, 19 of the world’s largest institutional investors, representing more than $4 trillion in assets under management, have convened the Net-Zero Asset Owner Alliance and pledged to transition their investment portfolios to net-zero GHG emissions by 2050.
HarbourVest is committed to developing an actionable climate change strategy in 2020 that reflects our capabilities and stewardship potential.
Our goal is to develop a meaningful understanding of how the effects of climate change may impact our investments, and what we can do to build portfolio resiliency on behalf of our clients. Our business case for doing so is preparedness.
As such, and in adherence to the principle of industry collaboration, we plan to organize our strategy in line with the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and will engage with GPs on the adoption of the TCFD framework to assess and manage climate-related risks. As part of our ESG scorecard and reporting, we will begin to capture data regarding adoption amongst GPs and use this knowledge to educate and lead the industry.
Established by the Financial Stability Board (FSB), the TCFD provides a valuable framework for evaluating and reporting climate-related risks, as well as the related governance issues that are essential to managing them. Users are encouraged to apply concepts of materiality analysis and forward-looking analysis to test the resilience of their business strategies. The framework also operates as a format to structure investor/corporate engagement on climate change.
The framework is supported by four pillars: Governance, Strategy, Risk Management, and Metrics and Targets. Our corresponding commitments for 2020 are outlined below.
Vice President, ESG
Natasha joined HarbourVest in 2019 from the Principles for Responsible Investment (PRI), where she worked closely with LPs and private equity firms to evolve industry practices on ESG. She is based in our London office.
TCFD FRAMEWORK - OUR COMMITMENT
Our corresponding commitments for 2020:
We will articulate our position on climate change and clarify oversight and management responsibilities for that position internally.
We will engage the senior investment team to have a meaningful discussion on the potential impact of climate change scenarios to our investment strategies.
We will engage with GPs on the adoption of the TCFD framework to assess and manage climate-related risks. As part of our ESG scorecard and reporting, we will begin to capture data regarding adoption amongst GPs and use this knowledge to educate and lead the industry.
Metrics and Targets
We will support and collaborate with GPs on the identification of climate-related risks and target-setting for risk management.