The topic of sustainability has reached the private markets. When it comes to private equity, private debt, infrastructure and real estate investments, investors not only have return expectations, they also want to know how their investment decisions affect the environment and society. Institutional investors in particular are increasingly committing to environmentally and socially responsible investment. Stakeholder pressure is not the only factor here. Sustainable and thus future-proof investments are also worthwhile from a financial perspective. However, as private markets are not a homogeneous asset class and there are no uniform standards for measuring sustainability, the careful selection and valuation of suitable assets is particularly important here. The long-term nature of many illiquid investments requires not only an assessment of the immediate environmental and social consequences, but also an evaluation of possible regulatory and legal changes in the future. Added to this is the growing social sensitivity to this issue. "A private market investment with CO2, reputational or governance risks jeopardises the investor's return prospects. Managing sustainability risks is therefore a central component of our investments in the private markets ", says Carsten Hermann, Managing Director FERI Trust GmbH.
In order to provide investors with a comprehensive and independent assessment of the sustainability of their private market investments, FERI has continuously developed its portfolio management in this segment over the past years. In addition to sourcing, i.e. finding attractive investment opportunities and talented managers, due diligence has also been expanded. As before, each investment is subjected to a thorough economic, tax, legal and financial review. In addition, a dedicated analysis of sustainability aspects is now carried out. "This analysis provides information on the sustainability character of the respective investment. Starting with investments that commit to one or more ESG goals to impact investments that make a real and also measurable difference in clearly defined areas," says Hanna Hornberg, director at FERI Trust.
FERI monitors compliance with the sustainability goals associated with the individual investment using a system developed specifically for this purpose, known as "FERI SDG Mapping". The reporting system refers to the UN's Sustainable Development Goals (SDGs) and uses specific key figures to show investors the extent to which their investment is achieving these goals. The information is available both at the level of individual investments and projects and in aggregated form. The "FERI SDG Mapping" is currently being expanded for further asset classes.