ESG Disclosures in the Private Equity Industry
86 Pages Posted: 15 Nov 2022
Date Written: November 1, 2022
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
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