An “overwhelming” majority of private equity investors plan to tighten their management and measurement of ESG performance in the next two years, research suggests.
Overall, 88% of the 150 private equity investors responding to an Intertrust survey said they planned the move – but half of them were concerned that using their own ESG methodologies would leave them open to accusations of greenwashing.
“Although support grows for the Principles of Responsible Investment (PRI), regulators have yet to agree on independent reporting standards. Without these standards, private equity remains subject to greenwashing accusations,” said Chitra Baskar, global head of funds at Intertrust, a fund administrator.
He added that general partners (GPs) were expanding their measurement of ESG behaviours within each of their portfolio companies due to investors seeing correlations between excess returns and other factors including sustainability. Over 50% of respondents believed they would benefit from a greater focus on ESG - but a sizeable minority (32%) were pessimistic about returns.
The three of biggest problems for ESG development in private equity were identified as quantifying impacts, associated costs and resources, and managing multiple sources of ESG data.
GPs predicted it would take over five years before they could produce standardised ESG data across portfolio companies.
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