Climate change is a clear and present danger.
The march toward a potentially uninhabitable earth has already begun. The Great Climate Migration is underway. Cities such as Boston and New York are already constructing buildings with catastrophic flooding scenarios in mind. As the world battles a pandemic, the United States is also dealing with one of the worst wildfire seasons and most active hurricane seasons in modern history. These events occurring simultaneously are not mere coincidence, but rather visible evidence of the ways in which human activity is driving climate change.
Effectively combating climate change will require enormous amounts of effort and capital. The private equity industry, with $6.5 trillion in assets under management and a record-breaking amount of dry powder, will play a crucial role in the future of corporate sustainability. A key dynamic will be the alignment of ideals between limited partners and general partners. The 2020 Global Private Equity Barometer by Coller Capital found a surprising disconnect on key ESG (Environmental, Social, and Corporate Governance) issues between the two parties.
- 47% of North American LPs surveyed believe GPs are not taking climate change seriously enough in their investment policies and practices. This number rises to 65% and 77% for European and Asia-Pacific LPs, respectively.
- LP investors are aware that private equity plays an influential role in mankind’s response to climate change, with 64% of surveyed LPs agreeing that PE “often modifies competitive dynamics...