Private equity and ESG investing

Abstract

This chapter explores the history and current state of sustainable investing within the private equity (PE) industry. In doing so, it presents evidence of a rising demand for a sustainable approach to private investments as well as the need for further development of environmental, social, and governance (ESG) data analysis to enhance investment decision-making in the private equity world. It argues that PE investors are strategically positioned to drive this shift toward investment standards that take account of ESG impacts and to create the sustainable investing tools needed to deliver greater transparency, better resource management, more careful risk mitigation, and higher returns than traditional investment strategies alone. Such a shift will require further market standardization, consolidation, and self-regulation among industry participants. The chapter concludes that, while implementation challenges remain, improved ESG tools, products, and services will ultimately yield a more efficient market as the private equity industry benefits from the unparalleled growth of sustainable investments.