Responsible Investing Framework for Private Equity
This initiative aims to provide tools and insights to maximize private equity's potential and provide regenerative capital
The NYU Stern Center for Sustainable Business (CSB) is using its platform as a well-respected finance school, its credentials in ESG and sustainability, and its extensive network, to collaboratively develop an accountability framework and associated tools and convenings for making private equity (PE) more sustainable, based on extensive research and stakeholder engagement. The initiative aims to provide investors, PE leaders, rural communities and civil society with the tools and insights to maximize PE’s potential to provide regenerative versus extractive capital. CSB has embarked upon a two-phase research and outreach initiative to improve accountability and societal performance of the private equity sector.
The call for a move to stakeholder capitalism and place-based investments comes at a time when private equity, whose goals are generally focused on shareholder return, has become an owner of many companies nationally. PE owns hospitals, newspapers, schools, real estate, manufacturers, consumer brands, and retail, among other sectors.
If the U.S. is to rebuild its economy, take care of key stakeholders such as workers and communities, and transform to stakeholder capitalism, private equity needs to be a positive player.
Phase One: Research, Responsible Investing Framework, and Outreach
CSB has initiated a robust academic review of the state of private equity in terms of its contribution to creating or extracting value and developed a Responsible Investing Framework that provides insights into the various categories of private equity impact, positive and negative. The framework lays out the main categories of impact for the PE firms and their portfolio companies, including:
- management & human capital management
- financial engineering
- fund management
- strategy & innovation
- reporting transparency
- societal impact
The framework is explored further with examples and case studies in a whitepaper by NYU Stern CSB titled The Road to Responsible Private Equity.
Thank you for the support
A special thank you to the US Endowment for Forestry and Communities for their generous support of our research in Phase 1.
Phase Two: Tools and Resources for Responsible Investing
If you are interested in learning more, please email us at sustainablebusiness@stern.nyu.edu.
Thank you for the support
We would like to thank ADL for their involvement, seconding a PE research analyst on this research as well as senior partner advice and support.
A Responsible Investing Framework, Insights, and Cases Toward a Positive Pathway
An analysis of the Responsible Investing Framework’s key findings and real-world applications. The whitepaper walks through each category with examples of problematic and positive PE practice, providing insights into pathways that provide positive results for shareholders, portfolio companies, and society.
Additional Resources
TCDF Implementation: Considerations for Private Equity
Private equity (PE) firms and their portfolio companies (PCs) have a critical role to play in the transition to a low-carbon and climate-resilient economy. The purpose of this document is to support PE firms along their climate journey. It was developed by KPMG at the request of Initiative Climat International (iCI) and the British Private Equity & Venture Capital Association (BVCA) in response to calls from PE firms for practical guidance on climate disclosures that considers the specific context of investors in private markets as well as the diversity in approaches to climate across firms. It also seeks to satisfy the needs of private markets investors for comparable disclosures across firms.
Based on detailed input from a wide range of firms and other stakeholders (including the TCFD itself), the guide is a comprehensive tool that offers detailed practical suggestions on how different firms can use the TCFD recommendations in their climate reporting, either voluntarily or under FCA regulations.
The guide signposts practical tools that already exist, highlights how TCFD reporting can support firms’ understanding of climate risks and opportunities, and proposes a banded approach that reflects different firms’ different characteristics and priorities.