After the financial crisis of 2008 the characteristics of Private Equity put the spotlight on this asset class and confirm it as one of the most interesting in the market. Number of deals and capital at stake are consequently increasing year over year as results of a greater interests by investors. Most of the investment made in the last 10 years has an ESG focus, signal that the economic environment has not been the only one to change in these years where stakeholder theory established as an improved model to describe investors behavior and orientation. What really push investors to pursue ESG investment in Private Equity? Starting from analyzing the environment can be easily seen as international projects, associations and companies are working together to help the transition to a more sustainable economy. Value drivers and facilitators as risk management, lower costs, new business opportunities are pushing investment firms, and thereby investors, to commit capital in specific ESG-friendly companies. Barriers that years ago were considered impassable are now changing, and with them also the communication process and fiduciary duty between Limited Partners and PE investment firm. Empirical analysis performed to assess the level of ESG integration in Italian PE industry give us some important insights. The PE environment in Italy is mainly represented by small and medium companies, most of them already had a formal ESG policy and integrate ESG principles in their investments process. The integration is led by value creation opportunity, and therefore the increase in financial performance. Despite Italian companies realized the effectiveness of these drivers and declare to fully integrate ESG in their investment process only few firms effectively measure the impact of ESG activities on financial performance. This misalignment is due to a lack of standardized data, tools and models that allows to process and analyze the information collect, that lead to difficulties in measuring such impacts. The short-term expectation in this field predicts an increase in interests by LPs and portfolio companies, with them also PE firms will need to adapt by pursuing new approaches and improve the process of analysis.

After the financial crisis of 2008 the characteristics of Private Equity put the spotlight on this asset class and confirm it as one of the most interesting in the market. Number of deals and capital at stake are consequently increasing year over year as results of a greater interests by investors. Most of the investment made in the last 10 years has an ESG focus, signal that the economic environment has not been the only one to change in these years where stakeholder theory established as an improved model to describe investors behavior and orientation. What really push investors to pursue ESG investment in Private Equity? Starting from analyzing the environment can be easily seen as international projects, associations and companies are working together to help the transition to a more sustainable economy. Value drivers and facilitators as risk management, lower costs, new business opportunities are pushing investment firms, and thereby investors, to commit capital in specific ESG-friendly companies. Barriers that years ago were considered impassable are now changing, and with them also the communication process and fiduciary duty between Limited Partners and PE investment firm. Empirical analysis performed to assess the level of ESG integration in Italian PE industry give us some important insights. The PE environment in Italy is mainly represented by small and medium companies, most of them already had a formal ESG policy and integrate ESG principles in their investments process. The integration is led by value creation opportunity, and therefore the increase in financial performance. Despite Italian companies realized the effectiveness of these drivers and declare to fully integrate ESG in their investment process only few firms effectively measure the impact of ESG activities on financial performance. This misalignment is due to a lack of standardized data, tools and models that allows to process and analyze the information collect, that lead to difficulties in measuring such impacts. The short-term expectation in this field predicts an increase in interests by LPs and portfolio companies, with them also PE firms will need to adapt by pursuing new approaches and improve the process of analysis.

ESG Materiality and Integration in Private Equity Industry

LAZZARIN, GIACOMO
2021/2022

Abstract

After the financial crisis of 2008 the characteristics of Private Equity put the spotlight on this asset class and confirm it as one of the most interesting in the market. Number of deals and capital at stake are consequently increasing year over year as results of a greater interests by investors. Most of the investment made in the last 10 years has an ESG focus, signal that the economic environment has not been the only one to change in these years where stakeholder theory established as an improved model to describe investors behavior and orientation. What really push investors to pursue ESG investment in Private Equity? Starting from analyzing the environment can be easily seen as international projects, associations and companies are working together to help the transition to a more sustainable economy. Value drivers and facilitators as risk management, lower costs, new business opportunities are pushing investment firms, and thereby investors, to commit capital in specific ESG-friendly companies. Barriers that years ago were considered impassable are now changing, and with them also the communication process and fiduciary duty between Limited Partners and PE investment firm. Empirical analysis performed to assess the level of ESG integration in Italian PE industry give us some important insights. The PE environment in Italy is mainly represented by small and medium companies, most of them already had a formal ESG policy and integrate ESG principles in their investments process. The integration is led by value creation opportunity, and therefore the increase in financial performance. Despite Italian companies realized the effectiveness of these drivers and declare to fully integrate ESG in their investment process only few firms effectively measure the impact of ESG activities on financial performance. This misalignment is due to a lack of standardized data, tools and models that allows to process and analyze the information collect, that lead to difficulties in measuring such impacts. The short-term expectation in this field predicts an increase in interests by LPs and portfolio companies, with them also PE firms will need to adapt by pursuing new approaches and improve the process of analysis.
2021
ESG Materiality and Integration in Private Equity Industry
After the financial crisis of 2008 the characteristics of Private Equity put the spotlight on this asset class and confirm it as one of the most interesting in the market. Number of deals and capital at stake are consequently increasing year over year as results of a greater interests by investors. Most of the investment made in the last 10 years has an ESG focus, signal that the economic environment has not been the only one to change in these years where stakeholder theory established as an improved model to describe investors behavior and orientation. What really push investors to pursue ESG investment in Private Equity? Starting from analyzing the environment can be easily seen as international projects, associations and companies are working together to help the transition to a more sustainable economy. Value drivers and facilitators as risk management, lower costs, new business opportunities are pushing investment firms, and thereby investors, to commit capital in specific ESG-friendly companies. Barriers that years ago were considered impassable are now changing, and with them also the communication process and fiduciary duty between Limited Partners and PE investment firm. Empirical analysis performed to assess the level of ESG integration in Italian PE industry give us some important insights. The PE environment in Italy is mainly represented by small and medium companies, most of them already had a formal ESG policy and integrate ESG principles in their investments process. The integration is led by value creation opportunity, and therefore the increase in financial performance. Despite Italian companies realized the effectiveness of these drivers and declare to fully integrate ESG in their investment process only few firms effectively measure the impact of ESG activities on financial performance. This misalignment is due to a lack of standardized data, tools and models that allows to process and analyze the information collect, that lead to difficulties in measuring such impacts. The short-term expectation in this field predicts an increase in interests by LPs and portfolio companies, with them also PE firms will need to adapt by pursuing new approaches and improve the process of analysis.
ESG
ESG Materility
ESG Integration
Private Equity
sustainability
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/20.500.12608/37184