Private equity firms ramping up ESG integration, study finds

Feb 22, 2019
Climate change risk and human rights are central to firms’ concerns

Private equity firms are increasingly considering the ESG impact of their investment before pumping money into a company, according to a PwC survey.

The survey finds that investors are tuning into the fact that steering sustainable business practices through responsible investment can drive financial returns.  

For the fourth edition of its – ‘The Private Equity Responsible Investment Survey 2019’ – report, PwC polled 162 finance companies from 35 countries, including 145 private equity companies.

Almost 91 percent of respondents say they have an ESG policy in place or in development, up from 80 percent in 2013. In addition, 81 percent of those surveyed note that they report ESG matters to their boards at least once a year.

Meanwhile, 35 percent of the firms polled have a team dedicated to responsible investment activity. Of those without a specific function, 66 percent rely on their investment/deal teams to manage ESG matters.

Will Jackson-Moore, global private equity, real assets and sovereign fund leader at PwC, says: ‘We are at the stage that we can see ESG genuinely driving returns, and enhanced ESG practices can potentially enhance multiples: it may well be the next big value lever.

‘It is therefore vital for PE houses and investors alike to recognize that even if responsible investment may seem challenging there are numerous solutions and frameworks that can be applied to achieve positive outcomes.’

Two-thirds of respondents to the survey have identified and prioritized SDGs that are relevant to their investments and 43 percent have a proactive approach to monitoring and reporting portfolio company performance against the SDGs.

The survey shows that investors are concerned about the impact of climate change (76 percent) and human rights (83 percent).

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