LPs issue a climate-change 'wake-up call' for private equity
June 15, 2021
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(Getty Images/Nuthawut Somsuk)
GPs seeking LP investments may increasingly find that a climate-friendly investment strategy isn't just good public relations, but the key to successful fundraising.
- Just over three-quarters of limited partners surveyed by PE secondaries giant Coller Capital said they ranked climate change and sustainability as the market's most influential mega-trend when deciding where they will invest in the next five years. This was followed closely by trends in health and biotech.
- The survey showed that 47% of LPs think that a robust ESG (environmental, social and governance) policy will improve their long-term private equity returns. As such, GPs are under greater pressure to consider the ESG implications of their investment theses when courting LP commitments.
- "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," said Jeremy Coller, CIO of Coller Capital, in a statement.
- The survey's findings complement PitchBook's own 2020 Sustainable Investment Survey, which found that 55% of GPs say they have already included sustainable investing initiatives in their investment process.
- However, the market doesn't always agree on what constitutes ESG-driven investing. The PitchBook survey showed that nearly a third of GPs and LPs alike thought that the biggest investment challenge was that it was unclear how to define ESG and measure impact outcomes.
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