UNPRI: Private equity owners' poor performance on ESG can kill deals

Two-thirds of corporate buyers of private equity portfolio companies said that poor performance on environmental, social and governance factors affected their willingness buy the company or prevented the deal altogether, according to new survey results.

PricewaterhouseCoopers, on behalf of the United Nations-backed Principles for Responsible Investment Initiative, surveyed executives at 16 corporations, including Alliance Boots, Centrica and Xstrata. The majority of the corporations surveyed had made one to three acquisitions over the previous two years.

“The recent decision by private equity group Cerberus Capital Management to sell its investment in gun manufacturer Freedom Group following the tragic Sandy Hook school shootings in the U.S. underscores the increasing influence of LPs and the growing materiality of ESG issues on investment risk, return and reputation,” said James Gifford, executive director of the PRI Initiative, in a news release announcing the survey results.

More than 50% of respondents stated they would expect a discount for poor performance on ESG factors.

Charlotte Collins-White, spokeswoman for the UNPRI, could not be reached by press time.