Creating Sustainable Value in Private Markets

As private equity assets have increased, so too has the industry's ability to affect change due to the structural advantages of the private equity governance model and a longer holding period. Further, just as large asset owners have shifted sustainability practices in the public equity markets, they will drive a similar transformation in the private equity industry as well.

In response to these changing dynamics, the Forum's Future of Financial and Monetary Systems platform launched this initiative to explore if the private equity industry can be a key actor in fighting climate change. The first phase of this project culminated in May 2021. It focused on tracing the evolution of Private Equity since the Global Financial Crisis by looking at 3Rs: Returns, Relationships and Responsibility.

The second phase was launched in June 2021 to delve deeper on responsibility. It focuses on three key themes:

1. ESG and value creation: Does ESG create value and how is the relationship between ESG performance and financial performance expected to evolve?

2. Organizing around ESG: What conditions are required for investors in private asset classes to full integrate ESG into their investment processes?

3. ESG and the role of Private Equity: How do you ensure that PE is positioned well to improve ESG performance and not perceived as the place where 'bad assets' go to hide?

For more information about this initiative, please contact Drew Propson, Head, Technology and Innovation in Financial Services.

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