June 29, 2021

Private Equity: LPs Say ESG is a Top Investment Priority

According to Collier Capital’s “Global Private Equity Barometer” survey of LPs, private equity investors are all about ESG these days.  Here’s an excerpt from the company’s press release announcing the survey’s results:

Two major issues will drive change in LPs’ private equity portfolios in the next few years, according to Coller Capital’s latest Global Private Equity Barometer. Three quarters of all LPs will invest differently in response to issues connected with sustainability and climate change, and a similar proportion will focus on new opportunities in healthcare and biotech.

“The fact that key ESG issues – climate, sustainability and health – are at the top of investor agendas should surprise no one,” said Jeremy Coller, Chief Investment Officer of Coller Capital, “but the fact that half of all private equity investors think ESG investing will in itself boost their portfolio returns should be a wake-up call to anyone who still thinks ESG is a ‘nice to have’ or a PR tool.”

Maybe. However, if you read the survey, you’ll discover that there’s reason to believe that – among U.S. investors at least – lip service to ESG is the order of the day.  Why do I say that? Because the survey says less than one-third of LPs are willing to have any of their remuneration tied to performance with respect to ESG goals.  Even among the supposedly more “tuned-in” investors in Europe & Asia, only a little more than half are willing to connect ESG performance with their payouts.

John Jenkins