Private equity and RI

Are we nearly there yet? A new research report from PwC shows that the private equity (PE) industry believes that there is a clear business case for responsible investment – embedding the effective management of ESG issues in portfolio companies and believing in the value created.

In a survey for the report 46 per cent of the industry say the majority of their investors are interested in responsible investment (up from 21 per cent in 2013) and 40 per cent say poor ESG performance has led to a material discount in valuation.

Furthermore, over two-thirds (70 per cent) of respondents to this year’s survey have made a public commitment to invest responsibly (up from 57 per cent of respondents in 2013). In particular, PE firms are looking for potential ‘red flags’ that might undermine value in acquisitions.

There’s a strong financial business case at acquisition to integrate responsible investment thinking, but there are other drivers too including risk management, stakeholder pressure, and operational efficiency. There’s a need to understand the risks that impact upon not only their direct business and market but also those of their individual portfolio companies. Cybersecurity is top of the risk agenda, followed by human rights and climate risks.

This growing responsibility is reflected in the number of PE firms that now have their own ESG policies in place (96 per cent of the PE community have or will shortly have a responsible investment policy).

Full report here.

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