More than three quarters in private markets are planning to cease investing in or promoting non-environmental, social and governance (ESG) products by the end of 2025 according to research from PwC Luxembourg.
Their report ‘GPs’ Global ESG Strategies: Disclosure Standards, Data Requirements & Strategic Options’ said this suggests private market investors in private equity, real estate, infrastructure and private debt are shifting towards an “ESG or nothing” philosophy. The findings are based on a survey of 300 general partners and 300 limited partners across the world.
Nearly all, 87.5% of limited partners, are planning to increase their private market ESG investments over the next two years, with more than one third planning increases of more than 20%. As a result, PwC Luxembourg forecast that global ESG private market assets under management is poised to surge between two- and four-fold according to a base- and best-case forecast scenario.
“Asset managers are responding, with 86.5% of those surveyed planning to expand their ESG private markets offering over the coming 24 months in order to grasp this demand – of which almost half are planning to expand their ESG product shelves by over 20%,” said the report.
Two thirds, 66.6% of limited partners, said they are willing to accept higher management fees in exchange for notable improvements in ESG data reporting. Nearly half, 45%, said they would be willing to pay between 5% and 9% more in management fees and 23% were willing to absorb increases in excess of 10%.
Olivier Carré, Financial Services Market Leader at PwC Luxembourg, said in a statement that global private markets are on the verge of a substantial ESG-led transformation.
He added, “In this rapidly changing backdrop, general partners are urged to rethink their modus operandi and embed sustainability data and capabilities at the heart of the corporate culture and investment process in order to keep abreast with regulatory developments, meet investor expectations and use the sustainable transition as a differentiating factor.
“In doing so, general partners not only stand to minimise financial and reputational risks, but are in fact positioning themselves to unlock the full long-term value creation potential inherent to ESG integration.”
©Markets Media Europe 2023
