Responsible Investment: Creating Value from Environmental, Social and Governance Issues

Responsible investment is an investment approach founded on the view that the effective management of environmental, social and governance (ESG) issues is not only the right thing to do, but is also fundamental to creating value. Responsible investors believe that companies which are successful in avoiding ESG risks whilst capturing ESG opportunities will outperform over the longer term.

PwC survey, published March 2012, seeks to explore the private equity industry’s response whether managing ESG issues really help to create value. The report also examines what drives PE houses to focus on responsible investment, and how they are tackling the challenge of valuing and measuring their efforts.

 Key Findings:

  • Some 94 percent of private equity houses expect environmental, social and governance issues to become more important to their business in the next five years.
  • Investor pressure on such firms is the main, or in some cases the only, driver for this change of tack.
  • But 94 percent of private equity firms also believe that ESG activities can create investment value, with many identifying cost savings, incremental revenue generation through new products, or enhanced reputation.
  • Despite this increasing pressure from investors and a the wide acceptance of profit in ESG activities, only 20 percent of the private equity houses surveyed have put systems in place to measure value created from ESG activities.

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