The value of an investment today extends beyond its financial return. Whether through ESG, socially responsible, or impact investing, institutional investors are increasingly deploying capital in ways that can also benefit society and the world at large. Just over 42% of US investors – up sharply from 22% in 2013 – are incorporating ESG factors into their investment decision-making processes.¹ At the same time, demand for targeted solutions continues to grow. Assets in ESG-focused alternative investments totaled more than $600 billion at the start of 2018, a three-fold increase in just two years. More broadly, between 2016 and 2018, sustainable, responsible, and impact investing grew by more than 38%, rising from just under $9 trillion in assets to $12 trillion.²

As ESG continues to gain momentum, investors and managers will need to determine their optimal approaches. As a signatory to the Principles for Responsible Investment (PRI) since 2013, we embrace our dual role as a leading LP – which allows us to actively promote and advance core ESG principles with our external partners – and a leading GP, fully committed to strengthening our own ESG “core” by constantly improving from within. We wear both hats proudly and are delighted to share our most recent highlights with you in our 2019 ESG Report, which is fully digital for the first time.

It is fitting that we are moving into 2020 because investing responsibly requires good vision, and we spent considerable time last year enhancing ours. To better understand how our GPs approach ESG, we completed assessments on 178 managers using our proprietary scorecard, and we continue to share this data with lower-scoring managers that want to improve. We also invested in another set of eyes with the addition of RepRiskᵀᴹ, a due diligence database that is helping us actively monitor ESG and business conduct risks across our portfolio.

On the subject of diversity and inclusion, we continued to be a leading voice in 2019, participating in several forums and, where appropriate, leveraging our advisory board presence to deepen awareness and share insights and best practices. We also embrace diversity and inclusion across our organization – one-third of our senior-level professionals are female, more than triple the industry average³ – and this commitment extends to how we invest. In 2019, we made commitments to several diverse-led funds, and these funds have generated better returns than the non-diverse funds in our portfolio.

Internally, we have our eyes on the future. While our ESG foundation is solid, we also know change is happening daily, and we plan to continue leading from the front. We launched a major, cross-company transformation initiative in 2019 that will allow us to examine all aspects of our program and make enhancements. We also hired our first full-time, ESG-focused staff member with the addition of Natasha Buckley, who joined us from the PRI. One of the top items on Natasha’s list is addressing the climate crisis, which we know is foremost among investors’ top ESG concerns.

We hope you enjoy reading about ESG at HarbourVest, and that our pride in being a conscientious investor and engaged corporate citizen shines through. Whatever comes our way in 2020 and beyond, our pledge to you is to stay steadfastly committed to delivering strong financial results, and to be responsible stewards of the capital you have entrusted us to manage.

1 2019 ESG Survey, Callan Institute, October 2019

2 The Forum for Sustainable and Responsible Investment, “Report on US Sustainable, Responsible and Impact Investing Trends", 2018

3 Preqin, “Women in Private Equity”, 2019

Managing Directors Peter Wilson (left) and John Toomey

“As ESG continues to gain momentum, investors and managers will need to determine their optimal approaches.”