Tuesday, March 28, 2023
  • Login
CEO North America
  • Home
  • Business
    • Entrepreneur
    • Industry
    • Innovation
    • Management & Leadership
  • CEO Interviews
  • CEO Life
    • Art & Culture
    • Food
    • Health
    • Travel
    • Environment
  • Opinion
  • News
  • Multimedia
No Result
View All Result
  • Home
  • Business
    • Entrepreneur
    • Industry
    • Innovation
    • Management & Leadership
  • CEO Interviews
  • CEO Life
    • Art & Culture
    • Food
    • Health
    • Travel
    • Environment
  • Opinion
  • News
  • Multimedia
No Result
View All Result
CEO North America
No Result
View All Result

How Private Equity Can Create Value Through Purpose

in Business, Environment
How private equity can create value through purpose
Share on LinkedinShare on WhatsApp

The industry holds clear advantages for making the businesses it invests in more environmentally and socially sustainable. Interviews with leading players point to five priorities.

—

Pressure is growing on private equity firms to address environmental and social issues—as well as to generate financial returns. Failure to activate a critical mass of general partners (GPs) and limited partners (LPs) committed to such impact could expose the industry to heightened reputational and regulatory scrutiny. The industry must act now. Sustainable investing need not be a burdensome requirement, however. In fact, the industry has clear advantages in generating results. With full ownership control over portfolio companies and relative freedom from short-term pressures to deliver results, PE firms can lead the way in generating value through sustainability.

To assess the current state of sustainable investing in the PE industry, we conducted interviews with more than 30 leading GPs, LPs, and industry experts. Although no one-size-fits-all playbook emerged, these interviews highlighted five immediate priorities for private equity firms that want to make faster progress—and unlock more value—in sustainable investing.

Invest in capabilities and culture. Many LPs and GPs face a critical gap in the institutional capabilities necessary to act on sustainable investing opportunities. Installing leaders who have the right experience to straddle the worlds of traditional investment and sustainability is a critical first step in building these capabilities. At the same time, however, it is critical to avoid isolating operational responsibility under these champions. LPs and GPs must intentionally shift their organizational culture, too, creating a sense of ownership for sustainability initiatives at all levels.

Focus on a long-term plan. Building capabilities and driving cultural change to develop value proofs will take time and likely entail overcoming missteps along the way. To stay the course, private-equity LPs and GPs should take advantage of the greater time-horizon flexibility in private markets to optimize for long-term outcomes, not just quick wins.

Communicate the plan, along with measurable milestones en route. Because creating value through sustainability takes time—at both the individual asset level and the portfolio level—communicating the long-term plan to all stakeholders and marking progress along the way are vital to securing and maintaining buy-in. Communicating progress requires use of standardized metrics (to enable comparisons) and customized reporting (to accommodate the unique aspects of each investment). Asset-level transparency is critical, since different considerations attach to different assets and since portfolios turn over approximately every five years.

Don’t just divest, transform. Individual investors can progress toward their portfolio sustainability targets by divesting heavy-emitting assets and avoiding specific sectors. But this approach does not remove problematic assets from the global mix—it just moves them to another owner. For that reason, PE should not simply divest its way to sustainability. Instead, firms need to address the sustainability challenge head-on, by deploying capital to transform gray assets into green ones. This is an area where the private-equity industry as a whole can have a disproportionate impact, and where individual firms can develop differentiated capabilities.

Collaborate to address key barriers. Investors acting in isolation cannot effectively address such key sustainability challenges as standardization of measurement and reporting, and establishment of the right incentives to transform gray assets. Instead, LPs and GPs across the industry must continue to collaborate to set appropriate standards and policies. The current momentum and relative maturity of measures to combat climate change can serve as a testing ground for action on these ecosystem challenges, providing templates for system-wide collaboration across a broader set of sustainability topics.

The private equity industry is at a critical inflection point that requires participants to respond to rapidly evolving expectations about sustainability. This presents not only financial, reputational, and regulatory risks for investment firms to navigate, but also opportunities for them to achieve long-term value creation. Private equity must take action to seize this opportunity.

(Courtesy BCG. By Meagan Andrews, Shrinal Sheth, Vinay Shandal, Greg Fischer, Tariq Nanji, and William Lubega)

Tags: BCGSustainable investing

Related Posts

Carbon disclosure becomes mandatory
Environment

Carbon disclosure becomes mandatory

When cutting costs, don’t lose sight of long-term organizational health
Business

When Cutting Costs, Don’t Lose Sight of Long-Term Organizational Health

Take action to maximize recycling across business sectors
Environment

Take action to maximize recycling across business sectors

U. S. Businesses need to be more prepared for physical risks
Business

U.S. Businesses Need to Be More Prepared for Physical Risks

Keeping track of communications when going remote
Business

Keeping Track Of Communications When Going Remote

Research: the complicated effects of pay transparency
Business

Research: The Complicated Effects of Pay Transparency

Microplastics are filling the skies. Will they affect the climate?
Environment

Microplastics Are Filling the Skies. Will They Affect the Climate?

Esg outlook 2023: greater scrutiny on companies & investments
Business

ESG Outlook 2023: Greater Scrutiny on Companies & Investments

Climate stress tests for banks are coming. What will we find?
Environment

Climate stress tests for banks are coming. What will we find?

Upwork study finds 60 million americans freelancing in 2022
Business

Upwork Study Finds 60 Million Americans Freelancing in 2022

No Result
View All Result

Recent Posts

  • Symbotic’s CEO Rick Cohen shines a light on the consumer goods supply revolution
  • CEO John Wynne outlines how Fortis Solution Group is disrupting the packaging industry
  • CEO Keh-Shew Lu explains how Diodes Inc is pushing the frontiers of connectivity
  • CEO NA Andrea Pirondini explains why the Prysmian Group is best-in-class at cable solutions
  • Eric Clark on how ONE NTT is driving client-led innovation

Recent Comments

    Archives

    Categories

    • Art & Culture
    • Business
    • CEO Interviews
    • CEO Life
    • Editor´s Choice
    • Entrepreneur
    • Environment
    • Food
    • Health
    • Highlights
    • Industry
    • Innovation
    • Issues
    • Management & Leadership
    • Multimedia
    • News
    • Opinion
    • PrimeZone
    • Printed Version
    • Travel
    • Uncategorized

    Meta

    • Log in
    • Entries feed
    • Comments feed
    • WordPress.org

    • CONTACT
    • GENERAL ENQUIRIES
    • ADVERTISING
    • MEDIA KIT
    • DIRECTORY
    • TERMS AND CONDITIONS

    Editorials – stuart.james@ceo-na.com

    Advertising – media@ceo-na.com

    NEW YORK

    110 Wall St.,
    3rd Floor
    New York, NY.
    10005
    USA
    +1 212 432 5800

     

    MEXICO CITY

    Paseo de la Reforma 296,
    Floor 38
    Mexico City
    06600
    MEXICO

    • CONTACT
    • GENERAL ENQUIRIES
    • ADVERTISING
    • MEDIA KIT
    • DIRECTORY
    • TERMS AND CONDITIONS

    Editorials –
    stuart.james@ceo-na.com

    Editor-In-Chief –

    caroline.sposto@ceo-na.com

    Editorials – editorials@ceo-na.com

    Advertising –
    media@ceo-na.com

    NEW YORK

    110 Wall St.,
    3rd Floor
    New York, NY.
    10005
    USA
    +1 212 432 5800

    MEXICO CITY

    Paseo de la Reforma 296,
    Floor 38
    Mexico City
    06600
    MEXICO

    CEO North America © 2022 - Sitemap

    No Result
    View All Result
    • Home
    • Business
      • Entrepreneur
      • Industry
      • Innovation
      • Management & Leadership
    • CEO Interviews
    • CEO Life
      • Art & Culture
      • Food
      • Health
      • Travel
      • Environment
    • Opinion
    • News
    • Multimedia

    © 2023 JNews - Premium WordPress news & magazine theme by Jegtheme.

    Welcome Back!

    Login to your account below

    Forgotten Password?

    Retrieve your password

    Please enter your username or email address to reset your password.

    Log In