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ESG Factor Integration into Private Equity

Author

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  • Maria Cristina Zaccone

    (ALTIS Alta Scuola Impresa e Società, Università Cattolica del Sacro Cuore, L. Agostino Gemelli, 20123 Milano, Italy)

  • Matteo Pedrini

    (ALTIS Alta Scuola Impresa e Società, Università Cattolica del Sacro Cuore, L. Agostino Gemelli, 20123 Milano, Italy)

Abstract

Although more and more private equity (PE) firms are integrating environmental, social, and governance (ESG) factors into their investment strategies, there is no clear understanding of their reasons, the details of their activities, the tools they use or the barriers they face. Our study covers these gaps and provides an overview of current trends. We adopted a mixed-method approach, using both qualitative and quantitative data. We first interviewed ESG and PE experts and then submitted a survey to top PE players. Most PE firms integrate ESG issues because investors and other stakeholders pay increasing attention to them. We found that the tools used to assess ESG factors are checklists and that only a few PE firms used external advice from industry experts. Among the main barriers that PE firms face are difficulties in finding information and the lack of a comprehensive way to measure ESG issues. Our findings reveal that PE firms have two main approaches to ESG integration—risk management and value creation—and that the former is dominant. We contribute to the literature by explaining ESG integration in the PE industry and showing that an opportunity for value creation is being missed.

Suggested Citation

  • Maria Cristina Zaccone & Matteo Pedrini, 2020. "ESG Factor Integration into Private Equity," Sustainability, MDPI, vol. 12(14), pages 1-16, July.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:14:p:5725-:d:385298
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    References listed on IDEAS

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    2. Archana Saxena & Rajesh Singh & Anita Gehlot & Shaik Vaseem Akram & Bhekisipho Twala & Aman Singh & Elisabeth Caro Montero & Neeraj Priyadarshi, 2022. "Technologies Empowered Environmental, Social, and Governance (ESG): An Industry 4.0 Landscape," Sustainability, MDPI, vol. 15(1), pages 1-17, December.
    3. Larissa M. Batrancea & Ömer Akgüller & Mehmet Ali Balcı & Anca Nichita, 2024. "Financial network communities and methodological insights: a case study for Borsa Istanbul Sustainability Index," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-27, December.
    4. Ook Lee & Hanseon Joo & Hayoung Choi & Minjong Cheon, 2022. "Proposing an Integrated Approach to Analyzing ESG Data via Machine Learning and Deep Learning Algorithms," Sustainability, MDPI, vol. 14(14), pages 1-14, July.
    5. Banerjee, Rhythm, 2024. "Shifting Tides: the Effect of Institutional Divestments on the Global Market," MPRA Paper 121922, University Library of Munich, Germany, revised 11 Apr 2024.

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