Implementation of RI/ESG Policies Serve as Building Blocks for Value Creation in Private Equity

Capital Dynamics, a global private asset manager, today announces findings from its recent survey of private equity general partners (GPs) on responsible investing (RI) principles and the consideration of environmental, social and governance (ESG) factors in the private equity industry. 

Overall, the report indicates a market shift towards proactively adopting RI/ESG as a means of increasing returns, with over three quarters of respondents planning on incorporating it into their value creation strategy, suggesting that RI/ESG has moved beyond an administrative necessity to become a favored method of achieving higher returns. 

 Key report findings 

-The majority of private equity managers formalized RI/ESG policies in response to increasing investor requirements; commitment to RI/ESG is equally driven by its importance within investment risk management 

-For over a quarter of respondents, higher returns was one of the top drivers of implementing an RI/ESG policy 

-More than a third of participants measured and experienced a positive impact on EBITDA due to the implementation of RI/ESG policies 

-The survey revealed over three quarters of respondents will increasingly consider ESG factors as a value creation tool 

-The majority of private equity managers plan to enhance the level of their RI/ESG implementation in the areas of value creation, data collection from portfolio companies and reporting to investors 

 Angela Willetts, Co-Head of Private Equity Investment Management, comments: 

“The survey results show a strong industry-wide acknowledgement of the value ESG and RI can play in an investment strategy. When applied strategically, rather than as a token marketing gesture, they can produce tangible results that are directly reflected in returns for investors. Many GPs are already experiencing a positive impact on EBITDA as a result of adopting ESG/RI principles and we are not surprised by this result – what was a trend for some is now becoming a priority for many.” 

The survey reflects opinions of senior management and RI/ESG practices from 109 general partners of private equity funds across the globe, with 45% from Europe, 37% from North America and 18% Asia-Pacific and the rest of the world. Respondents represent various investment strategies and a wide range of recent flagship fund sizes, as well as different firm sizes. 

 Capital Dynamics believes that adopting RI principles leads to enhanced long-term financial returns and a closer alignment of objectives between institutional investors, other stakeholders and society at large. This is also the reason why the company integrates ESG into its investment analysis, investment decisions and post-investment processes and was an early signatory of the Principles for Responsible Investment (‘UNPRI’) in 2008. Capital Dynamics has been and continues to be actively engaged in initiatives to improve RI standards. For example, the Firm is engaged in several limited partner (‘LP’) initiatives to establish broadly accepted RI standards (e.g. the ESG Disclosure Framework for Private Equity ) and was actively involved in creating the British Private Equity and Venture Capital Association’s (BVCA) RI guidelines. 

The complete results of Capital Dynamics’ survey can be requested from info@capdyn.com. 

For further information please contact 

Carolin Hirschbiel, Head of Marketing and Communications 

+41 41 748 8422 

communication@capdyn.com 

Mauro Pfister, Head of Solutions 

+41 41 748 8421 

mpfister@capdyn.com 

About Capital Dynamics 

Capital Dynamics (the “Firm”) is an independent, global asset manager, investing in private equity as well as clean energy and infrastructure. We are client-focused, tailoring solutions to meet investor requirements. The Firm manages investments through a broad range of products and opportunities including separate account solutions, investment funds and structured private equity products. Capital Dynamics currently has over USD 27 billion in assets under management/advisement1

Our investment history dates back to 1988. Our senior investment professionals average over 20 years of investing experience across the private equity spectrum2. We believe our experience and culture of innovation give us superior insight and help us deliver returns for our clients. We invest locally while operating globally from our London, New York, Zug, Tokyo, Hong Kong, San Francisco, Munich, Birmingham, Seoul and Scottsdale offices. 

1 Capital Dynamics comprises Capital Dynamics Holding AG and its affiliates; assets under management/advisement, as of September 30, 2016 include assets under discretionary management, advisement (non-discretionary), and administration across all Capital Dynamics affiliates. 2Average years of experience held by Capital Dynamics’ Managing Directors and Directors in Investment Management. 

Disclaimer 

This document is provided for informational and/or educational purposes. The information herein is not to be considered investment advice and is not intended to substitute for the exercise of professional judgment. Recipients are responsible for determining whether any investment, security or strategy is appropriate or suitable and acknowledge by receipt hereof that neither Capital Dynamics AG nor its affiliates (collectively, “Capital Dynamics”) has made any determination that any recommendation, investment, or strategy is suitable or appropriate for the Recipient’s investment objectives and financial situation. A reference to a particular investment or security by Capital Dynamics is not a recommendation to buy, sell or hold such investment or security, nor is it an offer to sell or a solicitation of an offer to buy such investment or security. 

Capital Dynamics may have a financial interest in investments or securities discussed herein or similar investments or securities sponsored by an asset management firm discussed herein. 

The information herein has been or may have been provided by a number of sources that Capital Dynamics considers to be reliable, but Capital Dynamics has not separately verified such information. Nothing contained herein shall constitute any representation or warranty and no responsibility or liability is accepted by Capital Dynamics as to the accuracy or completeness of any information supplied herein. Before relying on this information, Capital Dynamics advises the Recipient to perform independent verification of the data and conduct his own analysis hereto with appropriate advisors. 

The opinions, beliefs and predictions expressed herein are those of Capital Dynamics. Analyses contained herein are based on assumptions which if altered can change the conclusions reached herein. Capital Dynamics reserves 

the right to change its opinions or assumptions without notice. Certain illustrations are based on fictitious funds, created solely for the purposes of demonstrating the theories set forth herein. 

This document has been prepared and issued by Capital Dynamics and/or one of its affiliates. In the United Kingdom, this document has been issued by Capital Dynamics Ltd., which is authorized and regulated by the Financial Conduct Authority. For residents of the UK, this report is only directed at persons who have professional experience in matters relating to investments or who are high net worth persons, as those terms are defined in the Financial Services and Markets Act 2000. In the United States, this document has been issued by Capital Dynamics Inc., a registered investment advisor. Redistribution or reproduction of this document is prohibited without written permission.