Can ESG and Sustainability Create Value Effectively for Private Equity ?

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While sustainable development is not a new term for economists, consideration of sustainability and ethical factors in finance is a relatively recent concept. Sustainability and ethical concerns are mainly reflected in finance through increased attention to Environmental, Social and Corporate Governance (ESG) considerations in investments. As far as Private Equity Investments (PEI) are concerned, they have been historically led and will continue to be led by profit, regardless of their nature. Nonetheless, Private Equity (PE) will have to progressively include ESG factors in their operations.
The paper contributes to the existing body of knowledge by investigating the latest generation of PE Funds (PEF) which are attempting to use ESG to “create more value with less risk” (Indahl and Jacobsen, 2019). The paper also seeks to understand whether PEI, as time-bound short-term financial tools, could be an instrument for long-term planning, fostering sustainability and enhancing an ethical approach to investments; and whether, in doing so, value can still be created, if not increased.

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