Top Investors Buy In to Environmental Performance

Proactively managing environmental, social and governance (ESG) risks and opportunities can be a powerful lever for value creation.  Since the launch of our Green Returns work in 2008, we’ve worked hard to convince private equity and institutional investors of that.  We’re now seeing the pay off as these issues have climbed up the agenda at leading private equity firms.

Industry leaders are no longer asking why they should focus on ESG, but how to do it. From integrating ESG into the investment process to hiring in-house ESG professionals to measuring and reporting ESG performance, private equity firms are beginning to develop systematic approaches to turning ESG management into a source of competitive advantage and strategy for value creation.

This week, Malk Sustainability Partners (MSP) in collaboration with EDF released an exciting new study that explores why and how private equity firms are increasing their focus on ESG management.

ESG in Private Equity: Perspectives and Best Practices for Managing Environmental, Social and Governance Issues shares insights from 19 private equity firms and institutional investors on the state of the market with regard to ESG issues and highlights the growing set of ESG best management practices that are emerging across the industry.

Over the past few years, we’ve seen a dramatic shift in thinking as investors have learned to view ESG issues not only in terms of downside risks, but as upside opportunities to create value.  As highlighted in Greenbiz.com’s recent coverage of the report, “More than half of the funds in the study have developed (or are developing) an ESG management program to create value,” and over 90 percent expect to increase their attention to the issue in the future. 

The second half of the document explores detailed best-practices related to leadership, due diligence, operations, metrics and communications.

We hope this report will serve both as a useful reference and guide for firms and investors thinking about their own ESG efforts. We look forward to continuing the conversation and collaboration with firms seeking to raise the bar for their industry.

The study is available at www.Malksp.com/ESG-Private-Equity/