The Environment and Private Equity: We Can Do Better
By Charlene Pedrolie
In today’s economy, consumers are increasingly aware of how their investments - large and small - will impact the lives of their children and grandchildren. The environmental, social and governmental (ESG) returns on our investments are becoming as important as financial returns. Mirroring individual investment at a much grander scale, private equity (PE) investors are grappling with a similar sense of increased urgency to include ESG considerations as part of their portfolio building efforts. Gone are the days of making top and bottom line deals. PE is trending away from its dark days of quick turnaround investments; those with little to no research on ESG impacts; with demand for responsible investing at an all time high. The fact remains, however, that is PE could be doing more to ensure it is protecting the environment and tracking progress made.
A 2012 PwC survey of the PE industry found that 94 percent of respondents believed that ESG activities could create value. However, that same survey found that 47 percent of PE houses did not publicly report on their ESG programs or their responsible investing strategies, and 50 percent did not have policies guiding ESG and responsible investing. So where does that leave us as PE investors committed to environmental protection? PE must go back to basics and consider the following in the coming year: