ESG Disclosures in the Private Equity Industry

86 Pages Posted: 15 Nov 2022

See all articles by Jefferson Kaduvinal Abraham

Jefferson Kaduvinal Abraham

London Business School

Marcel Olbert

London Business School - Department of Accounting; ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research

Florin P. Vasvari

London Business School

Date Written: November 1, 2022

Abstract

This paper offers the first systematic evidence on environmental, social and governance (ESG) disclosures provided by a global sample of private equity (PE) firms. Using historical websites from 2000 to 2021, we develop a novel measure of voluntary PE firm ESG disclosures. We find that these disclosures have been increasing over time, irrespective of the firms’ investment strategy, size, listing status or investment location. We investigate disclosure determinants and document that PE firms’ ESG disclosures are associated with mandatory ESG regulations aimed at publicly listed firms in countries of PE firms’ portfolio companies. ESG disclosures also increase when PE firms voluntarily sign up to United Nations’ standards of responsible investing and around fundraising events. Finally, we examine whether PE firms’ ESG disclosures match their investment activities. We find that PE firms with high environmental disclosures target portfolio companies with lower environmental toxic releases. Further, the funds of PE firms with high ESG disclosures achieve better returns. Overall, these findings indicate that PE firms’ take actions consistent with their ESG disclosures.

Keywords: Private Equity, Financial Reporting, ESG Disclosures, Voluntary Disclosures, ESG Investing, Value Creation, Fund Performance

JEL Classification: M41, G32, G34, G12

Suggested Citation

Abraham, Jefferson Kaduvinal and Olbert, Marcel and Vasvari, Florin P., ESG Disclosures in the Private Equity Industry (November 1, 2022). Available at SSRN: https://ssrn.com/abstract=4265171 or http://dx.doi.org/10.2139/ssrn.4265171

Jefferson Kaduvinal Abraham

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

Marcel Olbert (Contact Author)

London Business School - Department of Accounting ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research ( email )

United States

Florin P. Vasvari

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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