Private equity companies blind for sustainability premium?

June 23, 2008

Recently we have taken the initiative to research the private equity sector in The Netherlands. We felt that in general private equity players are absent in the debate on sustainable entrepreneurship. While listed multinationals are executing their sustainability strategies, the government is committed to 100% sustainable purchasing by 2010 and institutional investors such as ABP are promoting sustainability, private equity seems to be missing opportunities to pocket an additional premium.
Our findings confirmed our hypothesis. Respondents (19% of the members of the Dutch private sector industry organisation) agree that sustainability will increasingly impact their agenda and determine business success. However, at best their policy base to deal with this challenge is fragmented and poor. They do have some basic procedures for example in their investment process, but not for follow-up, engagement and exit strategies. On the basis of our research we have formulated three recommendations:
1) Private equity companies should better deal with the increasing impact of sustainability by setting up a strategy process, designing specific actions and targets that are aligned with their overall objectives. A tailor made approach is crucial;
2) They should engage with their portfolio companies in order to decrease risk and grasp opportunities, thus capturing a sustainability premium;
3) They should reconsider the limited and mostly defensive way of communication in the light of changed business and societal expectations.
If you want more information on this research, contact Wouter Scheepens, or Bart Heinink

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