Sustainable investments, sustainable returns. Pioneering private equity firms are showing that profit and purpose can go hand in hand. Here’s how.
Environmental, social and governance (ESG) criteria have acted as a driving force within investment portfolios for venture capitalists and other investors for years. Yet, the private equity (PE) sector is lagging.
To catch up with the times, PE firms can combine the entrepreneurial mindset that built their industry with the ESG value creation that is essential now. In doing so, they will forge a new model for success—one far more sustainable than their current one.
This is what PE leaders see as challenges and opportunities
We asked 120 private equity executives currently working on ESG investment strategies about the most important and the toughest areas of change when it comes to ESG investing.
While every PE firm is unique, grouping responses paints a picture of what executives feel is most important to change, versus the level of difficulty of that change. Some highlights:
Balancing priorities and challenges for a better world
PE firms are reevaluating their operating model on two levels—the portfolio level and the fund level. This is done —with a focus on strengthening their “Sustainability DNA” and incorporating ESG into the business model and investment value chain.
While there is no one-size-fits-all approach, certain foundational changes are commonly relevant to transformative operating models. To learn what private equity leaders told us they are doing to balance ESG priorities and challenges, as well as what your private equity team can do to embed ESG into your operations strategy, read our short report.
The time is now. The world has left behind a “tick-the-box” mentality regarding ESG, as citizens and leaders embrace the gravity and enormity of the sustainability goals our globe is facing. Private equity has some catching up to do but it’s already begun—a sign of hope for future progress.