Responsible investment practices have gained significant attention globally, reflecting the adoption of broad social concerns from institutions and individuals that wish to “invest with values.” The UBS Capstone team’s objective was to help UBS Wealth Management evaluate private equity fund managers on their ability to integrate Environmental, Social and Governance (ESG) considerations into their investment and due diligence process. The team aimed to evaluate how fund managers approach portfolio company selection and active ownership through the lens of ESG considerations, sustainability and materiality.
The team conducted a literature review of current industry practices, analyzed existing frameworks and conducted interviews with practitioners and experts in the field. Based on the team’s findings, they created a four-category framework to evaluate fund managers. In the second phase of the project, the Capstone team turned their conceptual framework into an actionable tool in the form of a due diligence questionnaire. Along with the due diligence questionnaire, the team designed a usage manual, indicating how each question should be leveraged to assess the fund managers on their ability to address ESG issues. With these two tools, UBS will be able to evaluate fund managers on their sustainable investing practices.