A research report published by 17 Communications, with contributed content from the Predistribution Initiative, about how the private equity industry is responding to systemic and systematic risks like climate change, COVID-19 and racial injustice.
The Private Inequity report found that manager responses tilted most toward easier moves that foster limited systemic change – 28% making statements and 15% donations – and least to the more substantive internal and external changes to policies and practices, which each saw action from less than 10% of managers. Climate change fostered the fewest manager actions overall, while the pandemic got the most.
The report also has 11 recommendations for managers to improve their ability to respond and help address systemic crises, including guidance on transparency and compensation policy changes, audits of current practices, new accountability mechanisms, and integration of diversity, equity, and inclusion principles, Rothenberg says.
“While we recognize the private equity industry is responding to calls for stronger ESG integration, and many have taken steps in a positive direction, systemic crises demand timely action and less of a piecemeal approach,” said Delilah Rothenberg, Executive Director of the Predistribution Initiative and a contributing author for the report. “Despite limited action to date, private equity firms are well-positioned to drive positive change given their ability to influence portfolio company governance, priorities, and even capital structures. To step up to the plate and demonstrate leadership, private equity investors need to conduct holistic assessments of their internal and external business practices to identify exposure and contributions to such risks, develop action plans with clear targets and timelines to close gaps, and communicate publicly about their ongoing progress.”
