As society is addressing the sustainability agenda, the consideration and management of ESG opportunities and risks in the investment process are becoming more important to fund managers and LPs alike to safeguard the long-term performance of their investments.
As such, responsible investment has increasingly become a top-of-mind issue for private equity fund managers and their investors, and ESG factors continue to play an important role in their investment decisions and the on-going development of the company after investment.
Private equity is foremost an ownership model for investments in privately held companies of all sizes and at all stages of development. The nature of the long-term partnerships formed through negotiations and ongoing interactions between GPs and LPs as well as GPs and their portfolio companies is fundamental to how the industry operates and sets it apart from other asset classes. Given this hands-on active stewardship of businesses and long-term ownership timeframe, as an asset class private equity is particularly well suited to integrating and managing ESG matters.