Poor ESG records scupper private equity deals

Companies with good environmental, social and governance (ESG) records are more likely to strike deals with private equity firms, according to research released earlier this month.

Two-thirds of respondents to the survey by the UN-backed Principles for Responsible Investment (PRI), conducted by PricewaterhouseCoopers (PwC), said that poor ESG performance had either blocked or threatened to block a deal from taking place.

Meanwhile a third said that an impressive ESG record “adds to the reputation and brand of a company” – making it more likely that transactions will be successful.

James Gifford, executive director of the PRI, said, “This report shows why ESG considerations should be a fundamental part of any private equity dealmaking process and how they can affect not only whether a deal happens but also its price.”

PwC interviewed 16 corporate buyers for the survey, including Alliance Boots, Centrica and EDF, asking questions on the influence of ESG in their operations.

A PRI survey from September highlighted climate change, executive pay and labour standards in the supply chain as three of the most urgent areas for ESG engagement.

This followed the launch by the FTSE Group of an ESG service unit in June, that it said was a “direct response” to growing calls from the investment industry to incorporate ESG issues.

Further reading:

PRI signatories pick out top ESG engagement issues

Encouraging sustainable finance: the Principles for Responsible Investment

The principles for responsible investment: a round-up

FTSE answers ESG demand with launch of service unit

FTSE’s ESG unit can “shed light” on responsible investment