The conference took place on November 28 at Paris and focused on the growing importance of ESG (Environmental, Social, and Governance) factors in the valuation of private equity investments. In collaboration with ScaleX Invest & Aether FS, this event provided valuable insights into how ESG considerations are shaping investment decisions and driving long-term value in the private equity space.
Summary of the conference below
Impact?
- ESG measures influence valuations by providing premiums in sustainable sectors, reducing financing costs, risks, and potentially even operational expenses (opex). However, standardized tools are required to maximize their effectiveness.
- Internal scoring tools are becoming increasingly widespread.
LPs & GPs
- ESG is often viewed more as a performance metric than a risk metric.
- Limited Partners (LPs) increasingly associate ESG initiatives with overall performance.
- ESG is becoming a differentiation criterion. Striving for “best in class” is essential to achieving top performance.
Exit
For Initial Public Offerings (IPOs), investors demand robust ESG practices, even if these do not always result in immediate premiums.
Practical challenges
- Collecting ESG data for companies remains a challenge due to a lack of tools and the extensive work required.
- Article 9 funds and sector-specific questionnaires help facilitate this task.
- The multiplicity of reporting requirements continues to be a hurdle for companies.
- ESG measures are managed over time, with funds providing support to monitor their progress throughout the holding period.