How to Promote ESG in Private Equity

Abstract

This study examines ESG in private equity and discusses the methods to promote ESG in private equity investment. Given that private equity investment has a relatively long investment period and is actively engaged in the management of the portfolio company, it can play an important role in the development of ESG. ESG in private equity can be applied across all investment stages such as deal sourcing, investment decision, ownership, and exit. The empirical analysis based on global PEF data found that ESG in private equity shows risk management effects. To promote ESG in private equity, I propose a clear definition of ESG goals for LPs, consideration of ESG factors when selecting GPs, creating value through ESG due diligence, ESG-based active engagement, and collaboration in ESG investing. I hope that this study will help market participants understand ESG in private equity investment and provide useful information on the development of ESG in the Korean private equity investment industry.