Generating upside from ESG: opportunities for private equity

02 August, 2023

70%

of respondents believe that ESG can help create value.
80+%

say that considering ESG is ‘in line with the pursuit of returns’.
32%

say ESG was a value creation driver in over half of recent deals.
57%

look at ESG factors when performing due diligence.

Leading private equity (PE) firms have long recognised that managing ESG factors helps create value. Our new survey shows most firms agree, seeing no conflict between ESG and returns. Here, we look at the industry’s evolving approach and highlight prospects for further gains.

Our surveys show that PE firms have come to regard the ESG agenda less as a source of risk and more as a wellspring of value. Many also integrate ESG factors into core activities such as due diligence. What sets leading firms apart, in our experience, is that they identify and pursue ESG-related opportunities at every stage of a deal, from targeting to exit.

In our report, we set out four practices that can orient PE investors toward more of ESG’s potential to create value:

Explore investments in underfunded industries and geographies to establish sustainable deal flow.
Factor ESG into the exit strategy before making the deal.
Look for green incentives and tax savings early in the deal structuring process.
Consider creative financing structures that use low-cost green capital.

To learn more about our findings—and these four critical practices, in particular—read the report below.