Celebrity weddings are well-known for their prenuptial agreements (or “prenups”), which are intended to help the happy couple negotiate the potentially bumpy road ahead. Similar care is taken when embarking on long-term, locked-in private markets transactions. Asset owners have long been used to conducting deep-dive due diligence of their potential providers and making sure to sign watertight written agreements with them.
Now that environmental, social and governance (ESG) factors are having to be considered throughout the investment value chain, how have private asset investors kept up with the rapid pace of change? As in personal relationships, it seems that the key to long-term success is not so much in writing prenups, but in choosing the right partner. A constantly evolving sustainability environment makes it very hard to predict future needs and incorporate all eventualities into written agreements. Limited Partners (LPs) are therefore learning to scrutinise General Partners (GPs) through new ESG-focused lenses.
NordSIP brought together six hands-on experts in private assets investments to discuss these themes. They were able to share their real-life experiences of this process of adaptation, with perspectives from both sides of the table. Given the challenges of integrating sustainability in illiquid asset classes, they expressed perhaps unexpected appreciation for the help and guidance offered by regulators and called for more dialogue and collaboration among investors.
The discussion also turned towards the need to consider the social implications of private asset investments, either as a factor within a climate-related project or as an investment theme in its own right. Our experts also concluded that unlike public markets, smaller players can have considerable clout in the right circumstances, so big is not always better. It was overall a lively debate highlighting the most up-to-date sustainability-related concerns of these experienced private markets players.
We hope that these insights will make it a little less complicated for you too, in your future relationships with private assets!
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