GPs are formalizing ESG + Sustainability governance structures, and increasing the resources devoted to oversight activity:
60%
of GPs say an ESG + Sustainability committee now leads their sustainability efforts, up from 43% in 2023.
51%
say their committee is now focused solely on ESG matters.
GPs have become more reluctant to engage in ESG + Sustainability policy work, other than where regulatory change requires it:
79%
of GPs say they have not recently made changes to these policies or how they are implemented.
Where GPs have made changes to policies, 61% say these adjustments were driven by compliance factors.
Just 11% have added new policies, while 10% have scaled back or ceased implementing policies.
GPs report that LPs are now less likely to express concerns about ESG + Sustainability issues:
Only 18% of GPs say LPs have raised concerns about their ESG + Sustainability policies, or implementation of these policies, down from 33% in 2023.
37% are seeing fewer requests from LPs related to ESG policies or restrictions on investments in certain industries.
A significant minority of GPs say their approach to ESG + Sustainability has been affected by the shifting views in the U.S. on key ESG issues:
25% of GPs say they have changed or slowed their ESG + Sustainability work as a result of recent pushback in the U.S.
ESG + Sustainability issues are a consideration at every stage of the investment process, with poor ESG credentials having the potential to derail new investments:
of GPs conduct ESG + Sustainability due diligence on most or all of the deals they consider.
87%
have rejected an investment after screening for ESG + Sustainability concerns, up from 23% in 2023.
49%
have made investments with a view to improving the business’s ESG credentials, down from 91% in 2023.
49%
Only
GPs recognize the potential for strong ESG + Sustainability performance to drive value and return:
92% of GPs believe that positive metrics will drive up the valuation of a business,
including 21% that describe this increase as significant.
93% believe that positive metrics will smooth the exit process when disposing of a portfolio company.
GPs face multiple ongoing risks and challenges as their ESG + Sustainability work continues:
The difficulty of keeping pace with rapidly evolving regulation is the top challenge faced by GPs.
By contrast, political, regulatory, and investor pressure in opposition to ESG + Sustainability policies and practices is a relatively rare concern.
Improved awareness around the issues connected to technology innovation is driving policies that support responsible practices:
91% of tech and tech-focused GPs say they or their portfolio companies have adopted responsible tech policies.
Concerns about how to adopt AI with responsibility are becoming more pressing as regulatory scrutiny increases and more portfolio companies adopt AI tools.
66% are consulting third-party advisors to assist with due diligence as they address responsible tech.
GPs are now acting on climate change issues, often by disposing of exposed assets:
64%
are not subject to mandatory reporting requirements on emissions and climate risk-related data but are voluntarily making disclosures in any case.
54%
have disposed of carbon-intensive assets or required portfolio companies to phase out carbon-intensive products, up from 33% in 2023.
GPs with exposure to heavy carbon footprint assets all now have formal policies in place on ESG + Sustainability data or have plans to introduce such policies.
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GPs are embracing greener investment practices but anxious to minimize the risk of being accused of “greenwashing”:
91% of GPs say they have green investment practices, but
62% are pursuing these practices quietly.
72% of GPs now have policies regarding communications or green claims by portfolio companies, a substantial increase from 54% in 2022.
