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Responsible investing remains an essential part of MPEP’s investment philosophy. We are convinced that an active ESG policy can improve the risk-reward profile of an investment and act as a powerful tool for value creation.
ESG integration in the lower mid-market requires a different approach than in larger segments of the private equity market. Governance structures are more heterogeneous, ESG reporting is less standardized, and data availability varies significantly across companies, managers and regions. Given these characteristics, a strictly exclusionary screening process is often not the most effective way to manage risk or generate above-average returns.
As a primary fund investor focused on the lower mid-market, MPEP applies a development-oriented ESG strategy focused on engagement and ongoing improvement throughout the investment lifecycle. Rather than applying rigid upfront exclusions, we work actively with our fund managers to strengthen ESG practices over time. This “engage and improve” approach allows us to identify ESG risks early, support operational improvement and capture value that would otherwise remain inaccessible.
The UN Principles for Responsible Investment (PRI) is an international organization that works to promote the incorporation of ESG factors into investment decision-making. We are fully committed to the six principles and also a signatory of the UN PRI.
Level 20 is a not-for-profit organization founded with the aim of improving gender diversity in the private equity industry. We have become a sponsor of Level 20 in 2022.
It is our firm belief that there is a positive correlation between doing things the right way and generating market-leading returns. Incorporating ESG criteria into the investment process not only helps to quantify risks that might be overlooked by traditional due diligence more easily, but also increasingly provides opportunity for value creation.
Liliane Armel
Managing Director
ESG is integrated systematically across MPEP’s primary fund selection process. This includes exclusion screening, ESG due diligence, binding ESG-related commitments prior to investment and ongoing monitoring throughout the fund lifecycle.
ESG due diligence is conducted using MPEP’s proprietary ESG assessment framework. The assessment focuses on governance structures, ESG integration into investment decision-making, transparency and reporting practices, as well as the manager’s operational capability to implement ESG measures at portfolio level.
MPEP applies defined ESG minimum standards across all investments while following a development-oriented approach in the lower mid-market. Within this framework, up to 30% of commitments may be allocated to managers with developing ESG frameworks, provided they demonstrate clear willingness and sufficient operational capability to improve.
This approach allows ESG considerations to be applied consistently while supporting active engagement where improvement potential exists.
ESG developments are monitored on an ongoing basis using an internal ESG scorecard aligned with the Principal Adverse Impact (PAI) indicators under SFDR and relevant metrics of the ESG Data Convergence Initiative (EDCI).
This framework supports structured oversight, progress tracking and constructive engagement with managers.