In conversation with Lincoln Pan, Co-head of Private Equity, and Jonathan Tong, Vice President of PAG
Q. How does PAG manage ESG at the fund management level?
Jonathan Tong: PAG is an alternative investment firm focused on Asia Pacific. I joined last year, and I sit at group level, providing support on a wide range of ESG issues: D&I, carbon emissions, corporate and social responsibility, and more.
I was specifically asked to help our PE business design a framework for integrating ESG into its investment decision-making and the way in which it manages and monitors the portfolio. We now have a dedicated ESG PE committee, and every potential investment is considered by that committee.
Lincoln Pan: Jonathan’s role is a new one for us. Traditionally, ESG sat in compliance, and we worried primarily about the requirements of our regulatory bodies. It was more of a box-ticking approach, but we were keen to think about how to drive value through ESG too.
We decided to add someone of Jonathan’s caliber because we felt we needed more thought leadership from the center. ESG should be part of what everyone does, but we wanted someone who would push thinking forward across the whole group.
Q. How is that shift going, from a compliance-only lens on ESG to an approach that considers value creation too?
Lincoln Pan: Three years ago, you could get away with telling stories; you gave your LPs a glossy brochure and that was enough. But LPs rightly want more. There is a tremendous demand for data, but also to hold people accountable for ESG commitments.
Jonathan Tong: That data is tremendously important in the value creation process. Once we become more data-minded, we can really understand the impact of our work. We know what the numbers mean—we understand the story they are telling—and they tell us something about the business itself. Then you can build a strategy and an implementation plan to drive further improvement.
Q. What do those strategies entail?
Jonathan Tong: We want to support our portfolio companies on their ESG journey. That’s an important part of my new role, to work with them as they pursue sustainability targets or other objectives. That’s hopefully where my expertise can make a difference.
In practice, every company has different issues to confront. If we invest in a financial services business, it is going to have a different set of material issues to a manufacturer. It’s a question of working with the businesses to understand their specific challenges and to identify where we can help.
[View source.]
