Responsible Investing: Sounds great, but what does it mean for private credit?

As private credit continues to grow in Australia, responsible investing is only as valuable as the rigour behind it.

Too often, private credit fund managers treat ESG (also known as responsible investing) as a compliance exercise. Boxes are ticked, screening rules are disclosed, questionnaires are returned, and assets are never actually inspected. The result is a growing gap between what is reported to investors and what is real, one that exposes investors to greenwashing risk and leaves genuine value on the table.

Speaking regularly with financial advisers and fund managers, we understand the challenges in this space are real. Data can be inconsistent, ESG frameworks are generic, and the pressure to present a clean ESG story can override honest assessment.

A disciplined, honest private credit manager starts with reality. That means working alongside property developers from the earliest stage of their projects, engaging hands-on to identify and maximise the ESG potential of each asset. As direct lenders, they are positioned to influence both the outcome of a project and its RI impact.

For investors, a responsibly minded manager would use something like a sector-specific ESG risk assessment scorecard, overlaid with real insights and data, to accurately, honestly and transparently monitor ESG upsides and downsides across every investment, on a monthly basis.

Woodbridge ESG and Responsible Investing insights

What we’re seeing:

• Investor interest in responsible investment strategies continues to grow
• ESG risk rating frameworks are only as valuable as the rigour behind them
• ESG is a journey, not a checklist

What Woodbridge is doing:

• Working alongside borrowers to identify key ESG opportunities and risks
• Transparently disclosing responsible investment risks and outcomes every month
• Actively gathering data by physically inspecting all our investments

“Responsible investing is only as valuable as the rigour behind it.” – Terence Lapsanas, executive ESG committee member.