Private Markets: The next ESG frontier
Synopsis: ESG parameters have traditionally been seen as more relevant to public companies because for them, the impact of material developments related to sustainability issues is much more immediate and quantifiable. This also implies that these ESG parameters which are relevant for the sustainability and business resilience of the organizations had largely been overlooked in M&A transactions. However, this is now changing. Many leading firms which operate in private markets are bringing external subject matter experts and setting up dedicated teams to ensure that they are not behind the curve on the huge ESG wave that has hit the markets. Notwithstanding media scrutiny and public opinion, there are also practical reasons as well on why this is helpful. Many private equity firms realize that ESG reporting is now becoming a regulatory requirement and hence, it is better to deal with the firms which are complying and are not ignoring these issues. There is no doubt that private markets will be one of the major growth areas for ESG in the next few years.