Posted by Macduy Ngo

Labour issues for private equity funds in emerging markets

Private equity (PE) investors are among the largest providers of capital to private companies in emerging economies and many aim to have positive sustainability impacts alongside generating investment returns. However, investment opportunities in emerging economies, where regulation and management experience may be lacking, come with heightened social risks, such as non-compliance with labour standards or even serious cases of labour exploitation or modern slavery.

This guidance document is based on work with several such funds over the past year to support their due diligence and portfolio engagement strategies and is based on the typical PE investment cycle. It explores how labour risk identification and management can be integrated at each stage. We have also produced a podcast with contributions from two PE funds operating in sub-Saharan Africa, Verod Capital Management and Cepheus Growth Capital, who explain the challenges they face and their strategies for identifying and managing labour risks.

We have also produced a podcast which explains the guidance in more detail and which includes contributions from the fund managers with whom Ergon worked.