ESG Footprints in Private Equity Portfolios: Unpacking Management Instruments and Financial Performance

46 Pages Posted: 8 Nov 2023

See all articles by Noah Bani-Harouni

Noah Bani-Harouni

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting; Massachusetts Institute of Technology (MIT) - Sloan School of Management

Ulrich Hommel

EBS Business School

Falko Paetzold

EBS Universität für Wirtschaft und Recht; University of Zurich, Center for Sustainable Finance and Private Wealth

Abstract

Based on data covering 206 buyout funds for the time period 2010-2022, this study examines how the utilization of different ESG-management instruments is linked to such funds’ ESG portfolio footprints and financial performance. Improving fund-level ESG footprints by 50% explains a statistically and economically significant net IRR increase of up to 12.4% over a fund’s life cycle. The outcome is linked to specific ESG-management instruments of private equity investors, such as centralised ESG management and ESG value enhancement plans, while no significant effect is recorded for other measures, such as ESG reporting frequencies and ESG impact controlling. The findings contribute to the perspectives on financial returns and impact in the still under-explored asset class of private equity.

Keywords: Private equity, Socially responsible investment, ESG, corporate finance, strategy

Suggested Citation

Bani-Harouni, Noah and Hommel, Ulrich and Paetzold, Falko, ESG Footprints in Private Equity Portfolios: Unpacking Management Instruments and Financial Performance. Available at SSRN: https://ssrn.com/abstract=4627273 or http://dx.doi.org/10.2139/ssrn.4627273

Noah Bani-Harouni (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Ulrich Hommel

EBS Business School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, 65189
Germany
+49 611 7102 1241 (Phone)
+49 611 7102 10 1241 (Fax)

Falko Paetzold

EBS Universität für Wirtschaft und Recht ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

HOME PAGE: http://www.ebs.edu

University of Zurich, Center for Sustainable Finance and Private Wealth ( email )

Plattenstr 32
Zurich, 8032
Switzerland

HOME PAGE: http://www.csp.uzh.ch

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