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Alternative Market Briefing

ESG moves up private equity agenda

Monday, May 17, 2021

Laxman Pai, Opalesque Asia:

The management of environmental, social and governance (ESG) issues is moving up the board agenda for private equity, however, climate risk exposure requires greater scrutiny, according to a new study.

According to PwC's 2021 Global Private Equity Responsible Investment Survey, 72% of private equity investors and managers always screen potential portfolio companies for environmental, social, and corporate governance risks and opportunities before investing.

Another 56% of those surveyed have refused to enter general partnership agreements or declined investments for ESG reasons, the study of the sustainability, ESG, and responsible investment practices of 209 private equity firms across the world reported.

Over the past 18 months, the business world and most global governments came alive to the existential risks posed by climate change. Increasingly, the financial services sector is taking action, and that is reflected in PE firms' concerns about climate risk.

More than a third - 36% - of survey respondents consider climate change during due diligence, to understand or mitigate the risk to portfolios. Half of the 47% of survey respondents that do not measure the impact of climate change on portfolios, plan to do so in the next year.

The PwC study also found an increasing ESG influence on business strategy throughout the transaction life cycle and across portfolios, with firms using ESG criteria to assess risks and identify va......................

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