Guidelines for Responsible Investing
The American Investment Council membership adopted responsible investment guidelines in 2009. Since first adopting such guidelines, evidence has continued to mount that consideration of ESG issues can create value for investments during the holding period, for the post-investment operation of the company, and to society over the longer term. The 2021 updated guidelines refer to environmental, social, and governance (ESG) issues that can be material to investment returns and/or societal outcomes. The range of ESG issues that are relevant and material to a particular company will vary – however they commonly include: climate risks and opportunities, resource efficiency, safe and equitable workplaces, public health, consumer well-being, human rights, and accountable and ethical governance.
Responsible investment practices have matured rapidly and will likely continue to change and grow significantly. As such, these guidelines offer a set of aspirational common principles that are intended to be used by member firms – in combination with other frameworks and guidance as needed – to implement the ESG, responsible, and/or impact investment programs that are most suited to their investment mandate.
The guidelines call for AIC member firms to:
- Consider ESG issues associated with investments throughout the investment process, including pre-acquisition, ownership, and at exit.
- Seek to be accessible to, and engage with, relevant stakeholders either directly or through representatives of portfolio companies, as appropriate.
- Seek to grow and improve the companies in which they invest for long-term value creation and to benefit a broad range of stakeholders. This may include taking steps to mitigate and/or adapt to climate change and other environmental impacts over the long term.
- Provide appropriate levels of oversight in the areas of audit, risk management, compliance, and potential conflicts of interest and to implement compensation and other policies that align the interests of owners and management.
- Seek to support and improve the well-being of employees as part of human capital management strategy and in compliance with applicable laws. This includes supporting the payment of competitive wages and benefits to employees; providing a safe and healthy workplace; and respecting rights of employees to decide whether or not to join a union and engage in collective bargaining.
- Seek to improve diversity, equity, and inclusion in the private equity industry and in portfolio investments, as appropriate. This includes efforts to address and resolve racial and gender disparities in recruitment, retention, and compensation.
- Maintain strict anti-corruption policies that prohibit bribery and other improper payments to public officials consistent with the U.S. Foreign Corrupt Practices Act, the OECD Anti-Bribery Convention and similar laws in other countries.
- Respect the human rights of those affected by their investment activities and seek to confirm that their investments do not flow to companies that utilize child or forced labor or maintain discriminatory policies.
- Provide timely information to their limited partners on the matters addressed herein, and work to foster transparency about these matters.
- Work with portfolio companies to advance these principles through appropriate governance structures (e.g. board of directors), with the goal of improving long-term performance and minimizing adverse impacts in these areas, consistent with their fiduciary duties.