Will ESG investing become mainstream in private equity – at last?
14 januari 2011
The Carlyle Group is one of the biggest private global investment firms. It originates, structures and acts as lead equity investor in management-led buyouts, strategic minority equity investments, equity private placements, consolidations and buildups, and growth capital financings. Typically the kind of outlet that might be qualified as a “barbarian at the gate” by many. Especially these critics might be surprised that Carlyle Group has published its first corporate citizenship report this week.
This inaugural report provides some valuable insights in how Carlyle is integrating environmental, social and governance (ESG) issues in its core processes. Investment guidelines where developed: “Considering environmental, public health, safety and social issues associated with target companies when evaluating whether to invest in a particular company or entity as well as during the period of ownership.” The report also covers some examples of how portfolio companies are dealing with ESG. A due diligence framework has been developed to unlock opportunities for operational improvement and value creation.
The report definitely has its short comings. It lacks transparency on data, metrics, targets, engagement processes and dilemmas. However, it is a valuable first attempt. Therefore it might serve as a benchmark for many other private equity companies that still seem to be struggling with ESG. For two years we have done research among Dutch private equity companies which proves that few, more accurate: none, are as advanced in ESG management as Carlyle seems to be. ESG risks and opportunities are often qualified as very relevant, yet no policy or strategy is being developed.
Carlyle is said to be a very likely candidate to acquire Dutch private equity giant Alpinvest. Hopefully this acquisition will then be an encouragement for the Dutch slow moving private equity sector to include ESG practices in its investment processes – at last.
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