ESG in the Top 100 US Private Equity Firms

The authors examine the ESG practices of the world's largest private equity firms. They find that ESG practices and their corresponding disclosures significantly lag those of publicly traded industrial firms. Approximately 58% of the top private equity firms disclose zero information about their ESG practices, and two-thirds of those that disclose have uninformative ESG information. Although 39% of firms have activities related to the S dimension of ESG, only 19% of firms have at least 10% women on their boards or as top executives. The authors create a comprehensive ESG score, including subscores for E, S, and G. Buyout funds, the number of PE employees, and listing status positively affect our ESG score. IRRs do not predict overall ESG scores but are related to higher social scores. As evidence of greenwashing, 71% of firms are signatories to ESG initiatives that are easy to implement and subject to lower accountability. On the other hand, 15% of firms are signatories to high-quality ESG frameworks, and their commitment is reflected by an increased workforce.