Perspectives of Australian Private Markets' Firms on ESG Factors and Concerns

There’s a pervading opinion that the rise of ESG concerns in private markets is a recent phenomenon, mostly driven by evolving priorities among investors. While the changing zeitgeist has undoubtedly had an impact on the increased focus on ESG, it’s not the whole story. Across private equity/venture capital (PE/VC) and private lending firms, investment professionals have for years seen ESG as an important tool, not just to mitigate risk, but also to create value and identify opportunities – though these concerns may not have been labelled as “ESG” per se. In fact, all participants see the opportunity to create value through sustainability as a key ESG driver.

To discuss how private markets are addressing the many layers of ESG factors and concerns, S&P Global Sustainable1 hosted a roundtable in October, inviting key contributors across private market firms in Australia to participate.

Key takeaways from the roundtable discussion:

• ESG has always been present in private markets.
• Creating value is the biggest driver behind change.
• The transition economy is creating opportunity for venture capital.
• ESG has become an important tool in risk assessment and onboarding.
• Metrics need to be flexible to accommodate diversity of portfolio companies.
• Divestment can drive change, but so can investor engagement.
• Private markets can lead the transition, but collaboration is paramount.