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Private Equity Firms and ESG - Friends or Foes?

Telander, Emil LU and Ullbors, William LU (2021) IBUH19 20211
Department of Business Administration
Abstract
The aim of this paper is to study the effects of private equity ownership on sustainability performance in private equity backed companies. The paper initially makes an introductory explanation of the private equity business model and covers indications that the industry is facing rapid change within the ESG space. Furthermore, it analyzes the current state of sustainability from a corporate perspective. Using three ratings, Sustainalytics, RobecoSAM, and ISS Quality Score, a single rating, a Portfolio ESG Score, is constructed as an average of the chosen ratings. Two groups are studied, private equity-backed companies having gone public via an initial public offering (IPO), versus other companies that have gone public without a private... (More)
The aim of this paper is to study the effects of private equity ownership on sustainability performance in private equity backed companies. The paper initially makes an introductory explanation of the private equity business model and covers indications that the industry is facing rapid change within the ESG space. Furthermore, it analyzes the current state of sustainability from a corporate perspective. Using three ratings, Sustainalytics, RobecoSAM, and ISS Quality Score, a single rating, a Portfolio ESG Score, is constructed as an average of the chosen ratings. Two groups are studied, private equity-backed companies having gone public via an initial public offering (IPO), versus other companies that have gone public without a private equity backer. A hypothesis is built on the basis of the literature review, with the consensus that private equity backed firms likely perform higher in ESG performance than the comparator group. The hypothesis is tested through a two sample t-test showing statistically significant results indicating a circa 10% higher ESG performance for private equity backed companies based on the Portfolio ESG Score. The results from the study can guide policymakers, investors and other stakeholders in the private equity industry to drive better informed decision making, such as weighing investment choices between public equity or private equity while incorporating ESG criteria. (Less)
Please use this url to cite or link to this publication:
author
Telander, Emil LU and Ullbors, William LU
supervisor
organization
alternative title
How Private Equity ownership affects sustainability performance in portfolio companies.
course
IBUH19 20211
year
type
M2 - Bachelor Degree
subject
keywords
private equity, ESG, socially responsible investing, environmental, social, governance, finance
language
English
id
9048973
date added to LUP
2021-06-24 14:54:44
date last changed
2021-06-24 14:54:44
@misc{9048973,
  abstract     = {{The aim of this paper is to study the effects of private equity ownership on sustainability performance in private equity backed companies. The paper initially makes an introductory explanation of the private equity business model and covers indications that the industry is facing rapid change within the ESG space. Furthermore, it analyzes the current state of sustainability from a corporate perspective. Using three ratings, Sustainalytics, RobecoSAM, and ISS Quality Score, a single rating, a Portfolio ESG Score, is constructed as an average of the chosen ratings. Two groups are studied, private equity-backed companies having gone public via an initial public offering (IPO), versus other companies that have gone public without a private equity backer. A hypothesis is built on the basis of the literature review, with the consensus that private equity backed firms likely perform higher in ESG performance than the comparator group. The hypothesis is tested through a two sample t-test showing statistically significant results indicating a circa 10% higher ESG performance for private equity backed companies based on the Portfolio ESG Score. The results from the study can guide policymakers, investors and other stakeholders in the private equity industry to drive better informed decision making, such as weighing investment choices between public equity or private equity while incorporating ESG criteria.}},
  author       = {{Telander, Emil and Ullbors, William}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Private Equity Firms and ESG - Friends or Foes?}},
  year         = {{2021}},
}