Private equity firms expect ESG pressure from investors to grow – PWC survey

Survey of 17 private equity firms

Private equity firms expect investor pressure on environmental, social and governance (ESG) matters to grown in the next five years, according to a survey from consulting firm PWC, PricewaterhouseCoopers.

“One of the key drivers for the rise of the responsible investing agenda in the PE industry is investor concern,” PWC says, adding this has been the main catalyst for taking action on ESG issues and defining their responsible investment strategy. “PE houses expect this pressure to grow in the near future.”

Just last month, Responsible Investor reported on the ESG ties between industry giant Carlyle and Dutch pension management giants PGGM and APG.

The PWC survey found that 88% of survey respondents think limited partners’ (investor) attention to ESG is set to increase. PWC spoke to senior figures at 17 private equity houses, including six of the top 10 largest global houses; the survey is called “Responsible investment: creating value from environmental, social and governance issues”.PWC says that responsible investment is another way for private equity firms to differentiate themselves in a competitive fundraising environment and “maximise” access to capital. The report finds that all the firms contacted consider ESG issues to some extent during investment appraisals, although there are different approaches during the hold period.

“A few progressive houses are leading the way, with robust systems in place for considering ESG risks and opportunities across every stage of the investment cycle.”

Some 50% of the houses surveyed did not have a policy on ESG/responsible investment and only 40% have systems to measure value created from initiatives. And almost half, 47%, do not report publicly on their ESG programmes or their responsible investment strategies.

PWC makes four recommendations for PE firms and their portfolio companies. These include: access the right expertise; adopt best practice approaches; measure the financial value created; and ramp up reporting. Link