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Signs suggest that investors are pursuing ESG-friendly targets, despite a lack of empirical evidence about these strategies.
Over the past 15 years, interest in environmental, social and governance (ESG) factors has created a noteworthy investment opportunity for private equity firms. As Bain Capital noted in a recent report, “ESG isn’t just a nice thing to do. It is becoming a critical element in gaining market share, engaging employees and raising capital.”
However, the growing attention paid to ESG raises a question: How can you quantify the validity of this type of investment without the wealth of empirical evidence that PE firms typically have at their disposal?
ESG constitutes a set of criteria applied in investment decisions to analyze organizational operations in the context of social and environmental consciousness. These types of investments have become more prevalent as many PE firms attempt to connect to a new generation focused on ethical concerns.
This article was published in partnership with Grata. It originally appeared in the “Behind the Data” section of the fall 2021 edition of Middle Market DealMaker.