Responsible investment and sustainable development growing priority for private equity

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Responsible investment is an increasingly significant consideration for both private equity houses (general partners – GPs) and investors (limited partners – LPs), according to a new survey released by PwC.

The Private Equity Responsible Investment Survey 2019 draws upon the views of 162 respondents from 35 countries/territories, including 145 PE houses.

The 2019 survey has found that nearly 81% of respondents are reporting ESG matters to their boards at least once a year, with a third (35%) doing so more often. Almost all (91%) report having a policy in place or in development, compared to 80% in 2013. Of these, 78% are using or developing KPIs to track, measure and report on progress of their responsible investment or ESG policy.

Most strikingly, 35% of respondents reported having a team dedicated to responsible investment activity (an increase from 27% in 2016). Of those without a specific function, 66% rely on their Investment/Deal teams to manage ESG matters.

Meanwhile, two thirds (67%) of respondents have identified and prioritised SDGs that are relevant to their investments (compared to 38% in 2016) and 43% have a proactive approach to monitoring and reporting portfolio company performance against the SDGs (up from 16% in 2016).

The survey also acknowledges a continued distance between those considering action, and those taking proactive steps. For instance, while 89% of respondents cite cyber and data security as a concern, only 41% are taking action. Similarly, 83% are concerned by climate risk for their portfolio companies, yet only 31% have acted upon this.

‘We are at the stage that we can see ESG genuinely driving returns, and enhanced ESG practices can potentially enhance multiples: it may well be the next big value lever.

‘It is therefore vital for PE houses and investors alike to recognise that even if responsible investment may seem challenging there are numerous solutions and frameworks that can be applied to achieve positive outcomes.’

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