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Capital Dynamics survey shows growing integration of ESG and value-creation strategies

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Capital Dynamics survey shows growing integration of ESG and value-creation strategies

27 May 2017,09:00

Capital Dynamics, a global asset manager, published a report on the relationship between the active management of environmental, social and governance (ESG) issues and value creation in April 2017. The research is informed by a survey which targeted 175 general partners (GPs) and had 109 respondents, primarily from Europe and North America (82%).

The report makes the case that ESG considerations are increasingly being factored into the private equity investment cycle. As a result, a growing number of GPs are identifying a positive impact on value creation. Given that ESG integration was relatively nascent at many of the GPs surveyed, only a minority felt able to quantify the impact on revenue and returns. However, the vast majority of respondents believe that ESG will continue to grow in importance and that they will increasingly use ESG to create value in their portfolios.

The key findings of the survey include:

  • 76% of GPs said that they will increasingly use ESG for value creation.
  • 54% of respondents often or occasionally reduce an acquisition bid price based on ESG analysis.
  • 36% said that they experienced and measured a positive impact on EBITDA due to ESG actions.

Of the minority (20%) of respondents who tracked the impact of ESG measures on revenue, 75% recorded a growth in revenue. Meanwhile, 38% of respondents tracked savings / costs associated with the implementation of ESG actions and none reported a decline in EBITA (indeed – as noted above – 36% measured a positive impact). The study therefore notes that ESG, at a minimum, “appears to pay for itself”.

Integration of ESG at the exit stage of the investment cycle is identified as being the least developed. Nonetheless, 29% of respondents noted that the ESG performance of a company had an impact on the exit valuation (either positive or negative).

For further details click on the following link: Responsible investment in private equity – A key component of operational value creation

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