Climate Value in Private Markets: What Does the Data Say?

Climate Value in Private Markets: What Does the Data Say?

The British Academy, 10-11 Carlton House Terrace, London

29th October 2024

This event examined the growing focus on climate in private markets, exploring whether the widely-held belief that robust ESG policies improve long-term returns is supported by data. The focus on climate in private markets continues to grow.

Three quarters of LPs rank climate change and sustainability as the most influential mega-trend when deciding where to invest in the next five years. Nearly half believe that GPs having a robust ESG policy will improve their long-term returns. Professor Alex Edmans presented to Unwritten clients, as well as climate finance leaders from banking, ESG leaders from public and private markets, standard setters and regulators to ask if that assertion is correct.

The conversation was framed by a 2022 Harvard Business Review study arguing that private equity is uniquely positioned to lead on sustainability, to which Professor Edmans offered his initial reactions. Operating under the Chatham House Rule, the facilitated discussion explored how to integrate climate into the investment cycle and apply a 'Rational Sustainability' approach to value creation. He also looked at how much investment-grade ESG data there is to work with, considering the challenges researchers can face in accessing reliable information on private companies and transactions. The event concluded by referencing a second study that attempted to quantify the uplift in exit multiples that private equity firms could experience by incorporating ESG into investment processes.