Responsible investing
HarbourVest has robust ESG due diligence and monitoring procedures in place for each of its investment strategies. These procedures support sound investment decision-making, which is at the core of how we seek to create compelling, risk-adjusted returns for our investors.
Our investment teams rely on two tools to support their ESG analysis, our internally developed ESG Manager Scorecard and RepRisk®, an external database that performs due diligence, monitors ESG and business conduct risks, and collects relevant data.
“We believe that ESG must be a core part of what we do because we believe ESG factors can make a difference in investment outcomes. We’ve embraced this in our business by tailoring ESG integration processes across our investment strategies, building out our dedicated ESG team, and developing data-driven insights."
Co-CEO Peter Wilson
ESG Manager Scorecard
Key Scorecard indicators
We believe that the ESG policies and processes of the GPs we invest with can be indicators for fund excellence. Accordingly, we use our ESG Manager Scorecard to evaluate a GP’s approach and capabilities on a range of ESG factors, compile the results to generate an overall rating, and consider this input in our decision-making process.
In addition to being a valuable research and data tool, the Scorecard serves as an engagement catalyst with our GPs. Many of those with lower-than-average scores reach out to us seeking guidance on how to add or strengthen policies, and we have successfully influenced several to formally adopt ESG principles.
Partnership management
- Quality of ESG policy and ability to execute on commitments
- Commitments to areas such as climate change and DEI
Investment process
- Sophistication and mechanics behind GP's processes for considering ESG factors in their investment decision-making and portfolio engagement processes
Reporting and transparency
- Quality of GP's reporting and incident monitoring
- Commitment to proactively and transparently engage with LPs on ESG activities
We compiled our Scorecard data to demonstrate how GPs are ranking on three key dimensions – ESG overall, climate change, and diversity, equity, and inclusion (DEI) – and to identify trends. The below analysis draws from a dataset of 229 GPs.
ESG Scorecard ranking methodology: All scores run from 0.0 (lowest) to 4.0 (highest). A 4.0 ranking represents a level of best practice that is not market standard; we set a deliberately high bar to give the more advanced managers room to improve.
ESG overall
Overall ESG score: Derived from Scorecard rankings on partnership management, investment process, and reporting and transparency
Climate change
Climate change score: Derived from Scorecard indicators on a manager's commitment to developing a climate change strategy and implementation of a strategy in alignment with the Recommendations of the Taskforce on Climate-related Financial disclosures (TCFD)
DEI
DEI score: Derived from Scorecard indicators on a manager's senior investment team diversity, their approach to improving diverse recruitment and retention, advocacy, and their strategy with respect to diversity in the portfolios.
ESG rank by geography
ESG rank by investment strategy
The ESG scorings used in this document are for illustrative purposes only and there is no guarantee these scorings will have any bearing on the performance of any GP/managers the fund invests with, or on investments made by the fund, nor that they represent any GP/manager.
Breaking down the data
- For ESG overall, a tighter concentration of scores in the upper ranges indicates that most GPs have established ESG process, policy, and resourcing.
- For climate change, the scores show that while there are advanced outliers, these strategies are still nascent with much work to do on climate risk analysis, emissions data collection, and target-setting.
- In terms of DEI, the rankings reflect more of a spread, suggesting that some GPs are lagging others in their approaches.
ESG process, policy, and resourcing
81% have an ESG policy
29% are PRI signatories
27% have dedicated ESG resourcing
Reporting and transparency
25% track ESG KPIs
26% have ESG on their LPAC agenda as standard
31% produce an annual ESG report
Climate change
6% have developed and 37% are committed to developing a climate change strategy
4% make TCFD-aligned disclosures
11% have conducted climate risk mapping of the portfolio
15% conduct carbon footprint analysis of portfolios
Diversity, equity, and inclusion
59% have a DEI/anti-harassment policy
66% monitor workplace diversity
22% conduct anti-bias/conscious inclusion training
In terms of efforts to strengthen diverse talent pipeline and retention:
66% of firms have recruitment initiatives in place to drive DEI
26% have thoughtful policies in place to improve retention
15% have mentorship programs
ESG incident tracking through RepRisk
RepRisk is a comprehensive, global database that provides reputational risk ratings for GPs and operating companies based on an assessment of reported ESG incidents associated with that company. Incidents are weighted according to severity, frequency, and source. Risk categories include reporting on fraud, misleading communication, child labor, occupational health and safety issues, and pollution or waste issues. All of our investment teams utilize RepRisk as part of ESG due diligence, and our investments are uploaded and tracked through RepRisk. We hold bi-weekly meetings involving ESG and investment team members to check for potentially material ESG incidents and have protocols in place for deal leads to reach out to GPs when issues are considered relevant and material, and to record the outcomes of those engagements. In 2021, we screened 104 reports and selectively engaged with GPs on 34 reports which we considered to be potentially material (i.e., concerning potential litigation, environmental impacts, or data security breaches).* We find that these engagements through transparent dialogue demonstrate the quality of our partnerships with GPs and allow us to better understand our own ESG risk management and incident response capabilities.
*We provide fund-specific reporting on our RepRisk-related engagement data for select funds.
RepRisk by the numbers (in 2021)
Active companies tracked by HarbourVest
12,000+
GPs tracked by HarbourVest
600+
Incidents screened by HarbourVest
104
Direct engagements linked to RepRisk data
34
ESG Data Convergence Initiative
HarbourVest is proud to support the ESG Data Convergence Initiative (EDCI), hosted by ILPA, which seeks to standardize ESG metrics and provide a means of comparative reporting and benchmarking on ESG for private markets. Through September 2022, the collaboration represented 215 participants and more than $24 trillion USD in assets under management.* In 2022, the inaugural 2021 calendar year data from members was aggregated into an anonymized benchmark by Boston Consulting Group (BCG) and the data will be built upon annually. HarbourVest is pleased to participate in the technology working group of the EDCI and contribute to the long-term success of this initiative and its mission to increase the quality, availability, and comparability of ESG data in private markets.
*ESG Data Convergence Initiative 2022. www.esgdc.org