Euro private equity dominates ESG space as alts managers focus on climate

Climate change, ESGNearly half (47%) of private equity managers are now addressing climate change through their ESG policies, a 13% jump compared to last year, according to LGT Capital Partners’ tenth annual ESG report.

The report, which analyses the activities of 392 managers globally (including 303 private equity managers) to assess improvements in ESG, revealed Europe continued to lead the way in integration, with 84% of European private equity managers assessed as ‘excellent’ or ‘good’ for their approaches, compared to 70% in Asia and 50% in the US.

While the portion of managers assessing climate risks notably rose from 32% last year to 43% this year, the data suggests less than half of managers prioritise climate risk.

The number of investors monitoring greenhouse gas emissions also jumped from 28% to 40%.

While Europe continues to lead the way, over the last five years, Asia has demonstrated the strongest improvement in ESG integration, with a 20 percentage point increase in the number of managers ranked ‘excellent’ or ‘good’, according to the report.

Half of European private equity managers had implemented an approach to climate change, as had 40% of managers in Asia. The US lags behind, with just 33% of those assessed having an approach in place.

When asked about future plans, including fund launches, managers indicated the number of SFDR Article 8 and SFDR Article 9 funds was expected to double in their ‘next generation of funds’.

Hedge fund managers had also made significant progress, with 64% now rated ‘excellent’ or ‘good’ for their ESG practices, compared to 25% last year.

“Over the past twenty years, since we started analysing ESG activities, we have seen clear and significant progress in how managers approach ESG issues”, said Tycho Sneyers, managing partner at LGT Capital Partners.

“In particular, this is reflected in areas such as climate change, D&I, and the continued trend towards outcome-oriented approaches, where we see managers integrating ESG aspects into their activities.

“Looking forward, we strongly believe that ESG integration will continue to help address the long-term challenges people and planet are facing and support investors to appropriately position their portfolios in the growing spectrum of ESG opportunities and risks.”


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