In the few short years since environmental, social and governance (ESG) investing first appeared on the scene, the private equity industry has tended to view it defensively – something “good to do” in addition to a fund’s normal business of buying and shepherding companies.

Now it is becoming a competitive weapon, in Europe especially.

As we explored in our 2021 Global Private Equity Report, forward-thinking private equity firms increasingly recognise that ESG has become central to how companies delight customers, gain market share, engage employees and create the best work environment.

More and more, the companies that can prove they behave more sustainably, equitably and responsibly than industry rivals will be able to command higher multiples at exit, get better financing and avoid regulatory pitfalls. Limited partners are stepping up demands that PE firms demonstrate measurable adherence to ESG standards. So is the best young investing talent.