Private Equity Firms and ESG - Friends or Foes?
(2021) IBUH19 20211Department 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:
http://lup.lub.lu.se/student-papers/record/9048973
- 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
- 2021
- 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}}, }