Private equity giant Blackstone Group Inc has for the first time asked executives in companies controlled by its private equity arm to regularly report on environmental, social and governance (ESG) matters to their boards, according to a letter seen by Reuters.
The world’s largest manager of alternative assets such as private equity and real estate has been seeking to bolster its sustainability credentials as investors increasingly question companies on their impact on the environment and workers.
Blackstone said in the letter to the portfolio company CEOs that they should report to their boards on climate risks, environmental certifications such green building ratings, diversity among employees and commitments to human rights.
“Environmental, social and governance factors are attracting greater focus globally and demand careful attention on your part,” Blackstone’s private equity business heads wrote to the portfolio company CEOs.
“We believe providing transparency for your directors on ESG-related matters is a best practice.”
The move to require regular ESG reporting in its private equity portfolio companies is significant for Blackstone because buying and running companies is the firm’s largest business by total assets under management.
Funds that manage money using environmental, social and governance factors have risen in popularity in recent years, putting pressure on other investors to respond. US regulators are also starting to scrutinize companies that fail to disclose risks stemming from climate change.
Some Blackstone portfolio companies have already been reporting on ESG matters, but this has not been standardized across the firm’s portfolio, said Christine Anderson, Blackstone head of external relations who also oversees the firm’s ESG efforts.
Companies in Blackstone’s real estate division have been reporting on ESG since 2019, she added.
A Blackstone spokeswoman said that the success the New York-based firm has had with ESG reporting in its real estate division is now leading the firm to expand the effort across private equity. Blackstone plans to take the reporting from its portfolio companies to develop standards and best practices across the firm, the spokeswoman said.
Last week, Blackstone announced a slew of new hires in ESG who will help implement diversity and sustainability initiatives across its businesses.
The firm does not yet ask portfolio companies to report sustainability data according to recommendations from the Task Force on Climate-related Financial Disclosure or the Sustainability Accounting Standards Board, a person familiar with the matter said. This is because the firm is still deliberating what sustainability reporting framework is the best one to use, the source added.