ESG: From Buzzword to Implementation

SS&C Intralinks recently had the pleasure of hosting the limited partner (LP) and general partner (GP) community in Hong Kong at a luncheon reception to discuss the latest sustainability developments in the region. The event was a collaborative initiative led by SS&C Intralinks and supported by the Hong Kong Private Equity Finance Association (HKPEFA), a self-governing non-profit organization that promotes best practices in the private equity and venture capital industry in Hong Kong.

Andy Hoemann, global head of alternative investments at SS&C Intralinks (pictured above), opened the event by delineating the evolving global sustainability landscape and addressed how adopting global environmental, social and corporate governance (ESG) frameworks like the SASB Standards can help private equity funds and their portfolio companies gain a competitive advantage.

Adrian Wong, manager, North Asia alternative investments at SS&C Intralinks, led a panel of seasoned ESG practitioners that discussed the state of sustainability disclosures and reporting, climate change and net-zero transition as well as best practices for implementing a sustainable practice. Here are some of our key takeaways from this session:

• The Sustainable Finance Disclosure Regulation (SFDR) was launched in the EU in 202. A common challenge shared by Asia-focused fund managers is how data is gathered and reported at the portfolio level. Start-ups or early-stage companies may not have a holistic approach to the collection or classification of the data required. Until there is greater harmonization of regulations, cross-border regulatory compliance will remain challenging and potentially expensive to implement.
• Aside from adopting sustainable practices in fund operations, Asian fund managers are taking a keen step ahead to address climate change and the transition to a lower-carbon economy. New Energy, Clean Tech and Sustainable Infrastructure are some of the hottest sectors in Asia’s investment landscape.
• With China’s dominance in renewables and advances in technology and regulatory policies, there is massive growth potential for green investments in the region. LPs are certainly paying closer attention to environmental impacts and basing their investment decisions more on the associated non-financial metrics around sustainability.
• The interpretation of what ESG means could vary across different regions and practitioners need to be aware and mindful of the respective local culture and policies to effectively implement sustainability strategies.

In the journey toward implementing sustainable practices in fund operations and investment strategies, it's common for fund managers to establish an ESG committee. However, beyond the mere establishment of a dedicated committee, it holds significant importance for GPs to engage in effective ongoing communication with a wide range of stakeholders, including investors and portfolio companies. This ensures that the strategies are not only thoroughly understood but also executed with precision and clarity.

We would like to thank our panel of esteemed speakers, Fiona Chin, Kim Perreard, Robert Liu and Yingwen Chin, for their time and invaluable insights that helped us navigate the evolving sustainability landscape. As Robert noted, “Every year the world is only getting warmer,” and this fight against climate change will require market participants and governments alike to commit and take timely action.

Pictured from left to right: Adrian Wong, manager, North Asia alternative investments, SS&C Intralinks; Fiona Chin, vice president, ESG & impact investing, Templewater Hong Kong Limited; Kim Perreard, senior ESG associate at Allied Sustainability and Environmental Consultants Group Limited; Robert Liu, chief executive officer, Huaneng Invesco Private Equity and Yingwen Chin, partner - Private Markets IDD at Albourne Partners.