The Institutional Limited Partners Association released updated tools Tuesday to help investors with due diligence and to measure how well general partners are managing diversity.
ILPA updated its due diligence questionnaire and a diversity metrics template to help with ongoing monitoring of progress related to diversity, equity and inclusion. The updates follow a public consultation process earlier this year.
ILPA CEO Steve Nelson said in a news release that market practices and ILPA guidance through the ILPA Principles "have evolved significantly" since ILPA first offered the due diligence questionnaire in 2013. "While DEI is a comparatively newer area of focus for LPs, the industry is experiencing a sea change in LPs' appetite for more nuanced information about team diversity and GP actions to advance DEI," Mr. Nelson said.
The new due diligence questionnaire includes sections on co-investments, general partner-led secondaries, credit facilities and data security/technology.
ILPA worked with the Principles for Responsible Investment on the ESG part of a 2016 due diligence questionnaire, and again for this latest version, which mirrors the PRI's guidance to limited partners. Peter Dunbar, PRI private equity senior specialist, said in the news release that the updated questionnaire, which now includes specific questions about climate considerations in the investment process, was the result of a lengthy collaboration with LP and GP signatories.
Changes to ILPA's diversity metrics template include a single set of globally relevant designations for race and ethnicity, a non-binary option on gender, additional self-identified dimensions of diversity such as LGBTQ+ and people with disabilities, a simplified structure for role designations across ownership and professionals, insight into staff movement and select portfolio company level data. The update reflects the state of reporting today and limited partners' long-term goals for sharing DEI information to offer a holistic total portfolio view, according to ILPA.
ILPA worked with FCLTGlobal to align the diversity metrics template with one used by the non-profit organization to track the board diversity of private companies. Standardizing the data on a shared platform "will be instrumental in driving adoption and ensuring efficiency and comparability," said Ariel Babcock, FCLTGlobal managing director and head of research, in the ILPA release.
"The additional nuance in the amended template will be invaluable for LPs and GPs seeking to measure and manage progress over time," said Jennifer Choi, ILPA managing director of industry affairs in the release.