HarbourVest's Annual ESG Report

Responsible investing

We have instituted robust ESG due diligence procedures within each of our investment strategies to support sound investment decision-making and create compelling, risk-adjusted returns for our investors. ESG review is incorporated as standard in investment committee materials across all strategies and our investment teams utilize two key tools for ESG due diligence and monitoring and engagement.

See our ESG data insights for key datapoints from our ESG Manager Scorecard and RepRisk.

Our investment approach gives us a front-row seat to the challenges and opportunities that both GPs and LPs are experiencing on the ESG front, affording us the unique opportunity to engage our GPs on developing a strong ESG program while simultaneously working with our LPs on structuring ESG-themed solutions and reporting mechanisms. We then can package our learnings and be a helpful thought partner to both sides of the private markets equation.
Natasha Buckley
Vice President, ESG

Our ESG processes are tailored for each of our investment strategies to support each team’s distinct approach to investing and the material ESG-related considerations for each strategy.

We continue to be excited about opportunities to develop targeted solutions and strategies as we look beyond ESG integration as the foundation of our program. Read more about these efforts in our featured insights:

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ESG Manager Scorecard

Due diligence

Our proprietary ESG Manager Scorecard is used to evaluate a GP’s ESG integration approach and maturity. Evaluation criteria are aligned with industry standards and the resulting assessment is generated by proprietary weightings, taking into account the GP’s policy, processes, and resources to manage financial ESG-related risks and opportunities in their investments, and their commitment to transparent and regular portfolio reporting. Our approach is grounded in the conviction that the ESG policies and processes of the GPs we invest with can be an indicator for fund excellence and should be considered alongside other investment indicators.

Monitoring and engagement

Our ESG Manager Scorecard is maintained as a live monitoring tool and updated regularly. Scoring data can be used to provide specific feedback to GPs on areas for improvement and peer benchmarking. Our team can leverage the evaluation and feedback processes to encourage continuous improvement from GPs and will (where practicable and relevant) prioritize engagement with lower scoring GPs to encourage the adoption of a systematic approach to ESG management.

Due diligence

Our investment teams use RepRisk to strengthen our ESG analysis of investment opportunities across our investment strategies and to consider related risks. RepRisk is a global database that provides reputational risk ratings for GPs and operating companies based on an assessment of reported ESG incidents associated with that company, which are subsequently weighted according to severity, frequency, and source. Risk categories include reporting on fraud, misleading communication, child labor, occupational health and safety, and pollution or waste.

Monitoring and engagement

RepRisk allows us to proactively scan for negative ESG incidents for thousands of portfolio companies and GPs across investment strategies. Investments are monitored through RepRisk and subject to a regular, periodic review process that screens for potentially material ESG incidents. We have protocols in place to discuss ESG incidents with the GP or lead sponsor when incidents are considered relevant and material, and to record the outcome of that engagement. We have found this practice has enhanced our dialogue with GPs and allowed us to better understand their ESG risk management capabilities.

Primary investments

When conducting due diligence on primary investments, we typically evaluate the fund sponsor’s (GP) ESG integration approach and maturity through our proprietary ESG Manager Scorecard. Our evaluation criteria are aligned with industry standards; the resulting assessment is generated by proprietary weightings and provides an overall ESG rating for the GP. This rating takes into account the GP’s policy, processes, and resources to manage financial ESG-related risks and opportunities in their investments, and their commitment to transparent and regular reporting on the portfolio. Our approach is grounded in the conviction that the ESG policies and processes of the GPs that we invest with can be an indicator for fund excellence and should be considered alongside other investment indicators accordingly.

In addition, our investment teams use RepRisk® to strengthen our ESG analysis of investment opportunities across our investment strategies and to consider related risks. RepRisk is a global database that provides reputational risk ratings for GPs and operating companies, based on an assessment of reported ESG incidents associated with that company, which are subsequently weighted according to severity, frequency, and source. Risk categories include reporting on fraud, misleading communication, child labor, occupational health and safety issues, and pollution or waste issues.

Direct co-investments

HarbourVest-sourced direct co-investments, we generally work with the lead sponsor to analyze opportunity-specific ESG considerations based on a given company’s business model, domicile, historical business practice, and sector. In addition, we analyze the company and lead sponsor RepRisk ratings, where available, and any relevant ESG incident data. We will also seek to assess the lead sponsor’s ability to identify and  manage ESG-related financial risks and opportunities through the application of our ESG Manager Scorecard.

Secondary investments

The type of ESG analysis we perform for secondary investments depends on the nature of the portfolio we are seeking to acquire. If we seek a more diversified portfolio, we will typically perform a high-level ESG screen, which entails a sector-based review that takes into account potentially heightened financial ESG risks, and typically a consideration of ESG Manager Scorecard analysis for key GPs represented in the portfolio and a RepRisk analysis of the largest portfolio exposures, where available. With respect to secondary opportunities where HarbourVest plays a key role in driving the terms of bespoke managerial arrangements and otherwise has significant influence, we often have a greater ability to advocate for the appropriate management of ESG-related financial risks and opportunities through dialogue with the relevant sponsor(s) and will typically complete an ESG Manager Scorecard assessment as a basis for that dialogue, either prior to or post investment close. With respect to single asset secondaries, the ESG Manager Scorecard and RepRisk screening are supplemented by an asset-level ESG analysis.

Private credit

For private credit investments sourced by HarbourVest, we generally perform a red flag assessment of opportunities presented for consideration, where deal teams may consider, among other factors, whether the opportunity presents heightened financial ESG risk to our fund programs. This review is supported by a RepRisk screen. In addition, we typically consider ESG due diligence performed by the lead sponsor, if available. We may also utilize ESG Manager Scorecard assessments of the lead sponsor to the extent such assessments are considered current and on file at the time the credit is under consideration. 

Infrastructure and real assets

HarbourVest invests in infrastructure and real assets across its primary, secondary, and direct co-investment strategies, and across various sub-sectors, including power and renewables, telecommunications and data infrastructure, transportation and logistics, energy and utilities, social infrastructure, and natural resources. Accordingly, the type of ESG diligence we perform depends on both the type of transaction (as outlined for each strategy above), and specific ESG-related sub-sector financial risks and opportunities.

Continuation solutions encompass a host of transaction types in which a GP secures interim liquidity and/or additional primary capital for their LPs in a strongly performing asset, or set of assets, that the GP will continue to own and control. Specifically, they include continuation funds, new funds created by GPs for the purpose of acquiring the asset(s) that continue to be managed by the same GP and capitalized by one or several secondary buyers, or equity recapitalizations involving a direct equity or structured equity investment into a portfolio company. These transactions can also include a parallel investment from the GP’s latest fund into that same pool of assets (a “cross-fund trade”).