Private equity firms, responding to surging demand for ethical investing opportunities, plan on hiring more professionals focused on environmental, social and governance principles, a survey has found.
Almost two in three PE firms will hire their first ESG-focused professional over the next three years or add staff dedicated to the issue, the survey by secondaries investment firm Coller Capital said.
“The process of embedding an ESG culture… remains a work in progress, but many are now becoming advocates for responsible investment,” Adam Black, Coller head of ESG & sustainability said in the report.
The findings come as ESG — social impact, responsible investing, impact investing — principles figure more prominently in investor decisions. Total assets touched by sustainable investment strategies have mushroomed 38% to $12 trillion since 2016, according to the U.S. SIF 2018 Trends Report.
The Coller survey of 85 general partners found that nine in 10 firms have social impact policies, and three in five PE firms employ at least one ESG-focused professional. The same percentage recognize that ESG monitoring requires special skills.
“Poor ESG is indicative of a poorly run business, and for positive change to be really effective it must be driven by organizational culture.”
Reflecting the issue’s importance, the executive committee or board oversees ESG at two in five firms instead of handing off the responsibility to less senior executives in compliance, investor relations or other functions.
PE firms also will be targeting diversity, which has been an industry sore spot. A survey by the research group Prequin found that women comprise just 18% of the private equity workforce worldwide, 10% of its senior management roles and 5% of its board seats.
In the Coller survey, women comprised just 20% of the firms’ partners and none of these companies were predominantly women-led. But 71% of the firms said that increasing diversity would be a focus, ranking behind only ESG coaching and training among areas they want to improve.
“Poor ESG is indicative of a poorly run business, and for positive change to be really effective it must be driven by organizational culture,” Black said.
- Survey respondents represented 452 European and North American private equity funds invested in Coller funds.
- Nine in 10 firms in the study included cybersecurity and financial crime issues in their ESG policies, but only 42% of these policies addressed climate change.
- Four in five Asia-Pacific PE firms are providing ESG training, a higher percentage than any other region.