GPs increasingly ruling out investments due to ESG – survey

The figure stood at 55% in the previous year's survey, according to Investec.

While the overall figure shows how ESG is increasingly impacting investment behaviours, Investec pointed out that the breakdown by respondent categories highlights notable discrepancies in the industry.

Among these is seniority, with ESG considerations having "significantly contributed" to the decision not to invest in a company for 83% of respondents below partner level, but more than half at partner level (58%) and managing partner (53%) level or equivalent. In terms of gender, 85% of women report having avoided an investment due to ESG concerns, compared with 57% of men.

Larger funds are also more likely to halt investment owing to ESG-related concerns. The vast majority (82%) of funds larger than GBP 1bn report having avoided investments due to ESG factors, compared to just 56% of those under GBP 1bn. Infrastructure and energy funds are the most likely to have done so (89%), with large buyout (79%) and private credit (78%) second and third, respectively. Venture capital (52%) and real estate (57%) are the least likely.

The survey also confirms that European GPs are still more concerned by ESG than their North American counterparts. Although the majority of North American GPs (57%) have avoided an investment on ESG grounds, this is lower than the UK (63%) and continental Europe (67%).

North American GPs are the most likely (60%) to cite their firm's own "core values" as the greatest influence on their policies towards ESG and sustainability, compared with 53% in the UK and 36% in Europe. Conversely, North American PE houses are far less likely to attribute the main driver of ESG attitude to investor pressure (32%) than their UK (46%) and mainland-European (57%) counterparts.

Investec worked with MJ Hudson to survey 219 private equity professionals between April and June 2021; 40% of respondents are UK-based, 31% North American, 18% in mainland Europe and 11% elsewhere.

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