Responsible Investment
The concept of responsible investment (RI) is founded on the view that the effective management of environmental, social and governance (ESG) issues is not only the right thing to do, but is also fundamental in creating long-term value. Responsible investors believe that companies that are successful in avoiding ESG risks while capturing ESG opportunities will outperform over the longer term. Typical ESG risks encompass the following issues:
- Environmental issues include pollution of land, air and water, eco-efficiency, waste management, natural resource scarcity and climate change. Environmental challenges also present opportunities for value creation, for example, generation of incremental revenue from new technologies, products and markets.
- Social issues encompass the health and safety, labour conditions and human rights of employees and those in supply chains. It also includes treating customers and communities fairly. Value creation opportunities might include improving productivity and increasing brand loyalty or product integrity.
- Governance in this context is generally held to encompass the governance of environmental and social issue management, anti-bribery and corruption measures, and issues related to business ethics and transparency. Initiatives implemented here might avoid negative financial surprises and reduce reputational risk.
Key drivers of RI
Risk management
Our recent survey of private equity (PE) managers' attitude to RI indicated that management of ESG risks is the key driver for action.
Access to capital
Limited partner (LP) pressure on managers to demonstrate their `RI' credentials, particularly when fund raising, is growing. Many LPs have signed the United Nations supported Principles for Responsible Investment (UNPRI), which is driving their interest.
Legislation
Countries are fast evolving their ESG regulatory frameworks owing to rise in dimate change and environmental risks, social challenges, and increasing cases of corruption.
Opportunity for value enhancement
A large number of managers are now focusing on `eco-efficiency', doing more with less, in managing investments. This approach has led to significant cost savings in the operations of investee companies.
Our services
We provide assistance to investment fund managers and their investee companies in identifying and managing ESG risks as well as opportunities throughout the investment lifecycle.
Investment acquisition
- RI / ESG policy development
- Sector and country specific risk and opportunity assessment
- Initial screening of potential Investments
- ESG due diligence (including Phase 1 and Phase 2 environmental due diligence)
- ESG action plan (ESG AP) development
Investment management
- Portfolio assessments of ESG risks and opportunities
- Capacity building on ESG
- ESG AP implementation and investment monitoring
- Setting up of environment and social management systems (ESMS)
- ESG reporting and performance management
Investment exit
- ESG liability assessment on sell side
- ESG readiness for exit review
Green bonds – PwC India service offerings
- Review issuer’s sustainability strategy and the business case for Green Bonds issuance
- Develop internal project selection criteria and process, and identify eligible projects
- Conduct environmental and social due diligence
- Develop measurement and reporting framework and key performance indicators to demonstrate green impact
- Assess adequacy of governance and internal management systems for tracking and allocation
How we can help?
Determine the approach
Our team can provide expert input to the creation and development of your Green Bond, ensuring that it fits with your overall sustainability strategy, help you define the objectives for the bond strategy, and ensure it meets the expectations of key stakeholders.
Assess the impact
Our experienced Environmental Due Diligence team can help you develop an appropriate framework to ensure the underlying projects meet Green Bond standards and enable you to assess and report the impacts of your green projects post-investment.
Our clientele
Our team has worked with a large number of financial institutions, including PE funds, structured credit investment companies, international pension funds, non-banking financial companies (NBFCs) as well as banks on RI engagements. Our clients deal with a number of financial instruments such as traditional debt and equity and mixed financing instruments. We have identified how ESG assessment requirements differ across asset classes of debt and equity and accordingly offer customised solutions for ESG risk assessment and mitigation.
