According to a report by PwC, there is a growing link between the Private Equity (PE) industry and socially responsible investing. PwC’s Private Equity Responsible Investment Survey 2019, which surveyed 162 firms globally, found that PE houses are increasingly factoring Environmental, Social and Governance (ESG) into their investment decisions and portfolio management.
Responsible investment is an approach to investing that aims to incorporate ESG factors into investment decisions, to better manage risk and generate sustainable, long-term returns. The survey found that 91% of respondents have already adopted or are currently developing a responsible investment ESG policy with 81% reporting their ESG matters to their boards at least once a year.
The survey also finds that 83% of respondents are concerned about climate risk in their portfolio so it comes as no surprise that risk management appears to be the main driver behind these new trends with an increase from 34% of people agreeing in 2016 to 44% in 2019. The other main driver was corporate values with 28% of respondents naming it as their key driver, an emerging response in this year’s survey.
There was also a high correlation between concern and taking action on emerging issues such as climate change and human rights. More PE firms are actively taking measures to address these specific issues for sustainable long-term results. 67% of respondents also now say they align their investments with the UN Sustainable Development Goals (SDGs), compared to just 38% in 2016 showing an overwhelming increase in responsible investors.
Although these statistics are incredibly promising, it is important to note that the uptake of ESG investing is not yet mainstream in all global regions. With 75% of the respondents being from Europe, the survey is not reflective of the investment community across the globe. However, the report remains optimistic and hopes that, as European firms diversify geographically, their influence in areas such as the Asia Pacific will drive progress to put responsible investment at the top of the investment agenda.
For more information, and to read the full report, click here.