Alternatives Update – FERI SDG Office: Sustainable investment solutions in the Private Markets segment

Driven by growing demand from institutional investors and flanked by regulatory requirements, the private equity industry is increasingly advertising its products with the label "sustainability". More and more providers are launching ESG or special impact funds. However, there are almost no ESG assessment standards or official databases for the investment instruments and funds of the private markets. Therefore, it is practically impossible for investors to determine whether an investment is really sustainable or whether the management is merely "greenwashing". If the investor wants to be sure that his capital investment is sustainable and even achieves a positive impact, a comprehensive review of both the provider and the respective fund strategy is unavoidable. This is the only way to avoid the risk of misallocation of long-term investment money. "In order to be able to judge whether an investment strategy declared as sustainable delivers what it promises, one has to look very closely. Asset managers and fund strategies must be credible, realistic and verifiable in terms of sustainability and impact achievement," says Carsten Hermann, Managing Director FERI Trust GmbH.

Specific return opportunities in the context of sustainability

FERI has therefore supplemented its proven manager selection from the classic private equity sector with special sourcing and innovative screening processes specifically for the selection of sustainable or impact funds. To this end, the FERI SDG Office works directly with the internal Private Markets team. Target fund managers must pass rigorous economic analysis and screening as well as answer in-depth questions about the valuation and sustainability process. At the end of this due diligence process, the quality of the manager is determined as an overall score. For investors, reporting and ongoing monitoring of the investments are equally important. FERI has introduced special indicators and assessment factors for this purpose as part of its ESG and impact assessment, which are later used in monitoring and reporting to measure success, as well as developing its own "SDG mapping". "This not only provides our clients with transparency on the SDG compatibility of existing investments, but in future they will also be able to identify their SDG contributions and thus specifically increase the SDG impact of their portfolio," explains Antje Biber, Head of FERI SDG Office. FERI is already successfully implementing the FERI Private Markets SDG concept and innovative SDG investment products for its clients. FERI will also present more details on this at this year's Institutional Money Congress in Wiesbaden.

The global asset management industry needs innovative investment solutions and binding market standards when it comes to sustainability. FERI seeks active dialogue with the investment industry as well as with clients and business partners and has been making an active contribution to numerous initiatives and institutions for years, especially as a member of the UN Principles of Responsible Investing (UN PRI).