The mandate of the broader private equity “ecosystem” goes well beyond earning competitive returns for the limited partners and their beneficiaries. After noting that PE investing is encountering ever larger “headline” and social risks, the panelists were in complete agreement that LPs should exert greater pressure on PE sponsors to take account of and try to address negative externalities when buying and operating their portfolio companies.
Bain Capital’s Double Impact Fund, for example, while always looking for ways of increasing profits and reducing risk, sets out to have a positive influence on its non-investor stakeholders, including employees. To that end, Bain develops and tracks company-specific metrics linked to positive outcomes, and then links those metrics to management compensation. And the director of ESG programs at the International Limited Partners Association points to ILPA’s programs for diversity and inclusion as a promising model.