"Human rights abuses often dealbreakers for PE managers, AP6 finds", September 2023

Private equity firms are routinely taking the issue of human rights into account when making investments, Sweden’s AP6 has found, though its research has also shown that uptake of the UN Guiding Principles on Business and Human Rights is not widespread in the sector.

The SEK68.6bn (€5.9bn) fund – distinct from the four larger AP buffer funds in that it invests solely in private equity – told IPE that its first human rights assessment has so far revealed many “good examples” from the funds it invests in, and that problems regarding human rights have ended up scuppering potential investments for the funds.

Per Norberg, sustainability specialist at AP6, told IPE: “...There were a lot of examples of funds having done due diligence on a potential investment, but then making observations that there could be challenges regarding human rights, or that there were confirmed problems with a potential investment....In several cases, those had been dealbreakers,” Norberg said, saying of human rights standards: “It is something funds are aware of and are considering.”..

...The fund’s three-strong sustainability team subsequently began conducting a human rights assessment of its managers, which has so far taken the form of a pilot study involving 13 managers...

...Norberg said reputational risk is the main problem for private equity funds around human rights – the risk associated with having companies in their portfolio that are involved in or accused of violations...

...The next step in AP6’s work on human rights is to complete the assessment for all of the funds it invests in.

Looking ahead, the recently-launched human rights assessment will be used as part of the buffer fund’s ESG due diligence in general as well as forming part of the institution’s annual ESG follow up...