Annual ESG Report

A message from our Executive Management Committee

Ongoing economic, ecological, and societal challenges serve as both proof of our interconnectedness and a reminder that the choices we make today are creating the world we will inhabit tomorrow. We believe our investing practices should reflect an evolving understanding and treatment of the real-world risks and opportunities that ESG considerations present to the assets that we manage for our clients. To deliver on our most fundamental commitment of seeking superior risk-adjusted returns we must recognize and support the global economy’s transition towards a more sustainable future. As always, investors who are better prepared for change will be better positioned to reduce the financial, operational, and reputational risk of their investment portfolios while enhancing value creation and revenue potential over the longer-term.

Supporting convergence on ESG data and methodology

The success of our, or any, ESG program is directly tied to the strength of its data. Yet, the key features of a healthy ESG dataset—its accuracy, accessibility, relevance, and timeliness—have historically been heavily challenged in private markets. Significant efforts have been made over the past year to solve this issue, arousing optimism about ESG data moving forward. We are actively participating in strategic industry initiatives to establish uniform ESG data standards and methodology, including the ESG Data Convergence Initiative (EDCI), an LP-GP collaboration seeking to standardize ESG metrics and provide a means of comparative reporting and benchmarking for private companies. This nascent initiative has already unlocked over 13,000 ESG data points on over 850 companies in HarbourVest’s portfolio.¹ Our leadership roles with the Initiative Climat International (iCI) and the Sustainable Markets Initiative’s Private Equity CEO Task Force (PESMIT) have contributed to the development of the Private Markets Decarbonization Roadmap (PMDR), which will allow GPs to use a common language when assessing the transition readiness of their portfolio companies and aggregate these classifications to the fund level for LP disclosure. These critical steps will support the objective assessment of an asset’s readiness to operate and continue to drive value in the emerging low-carbon economy.

The next frontier of progress

We continue to collaborate with our GPs to understand new ESG risks and opportunities they are contemplating in their investment processes and participate in collaborative investor initiatives to learn about new research, thinking, and developments. One recurring thread we have heard over the past year is a growing focus on how assets in an investment portfolio depend on, and impact, nature. The landmark global agreement to halt and reverse nature loss by 2030 reached at the United Nations Biodiversity Conference in Montreal (COP15) in December 2022 and the recommendations set forth by the Taskforce on Nature-related Financial Disclosures (TNFD) in September 2023 have set the course for nature and biodiversity to follow in the footsteps of climate change as a common part of the investment vernacular. We contributed to thought leadership produced by PESMIT on how private equity firms should be considering nature-related impacts and dependencies in their portfolio. For the first time in this report, we delve into a preliminary understanding of our own portfolio under these terms.

We believe the enhancements made to our ESG program over the past year make us better investors and better partners to our clients. These efforts, including those across data, industry involvement, and emerging trends, have garnered HarbourVest recognition from the industry in the form of awards from Real Deals and BVCA. We are excited about the continued evolution of our ESG program and the positive impact it has already made on our firm. We hope you find this update on our ESG activities both informative and encouraging. Thank you for your partnership.