Why ESG Strategy is Necessary for Private Equity Firms

Renowned as one of the pioneers in the fund finance industry, attorney Zac Barnett leads Fund Finance Partners, LLC as co-founder. As a globally recognized fund finance lawyer and authority in the private equity space, he has authored over 40 articles on fund finance laws, regulations, and structures in high-profile publications such as the Los Angeles Times. Zac Barnett has a wealth of experience as an attorney in securing fund financings for real estate, energy, infrastructure, secondaries, private credit, and private equity firms.

Private equity firms are responsible for managing funds generated by high-net-worth individuals or institutional investors, or private equity funds. On the investors’ behalf, private equity firms invest the funds in companies by taking control of the companies’ stakes. Because private equity funds are a pool generated by qualified or accredited investors, the firms need to consider all factors, including the investors’ ethical standards and values.

Given that investors now value funds from companies that can adapt to the ever-changing economic and climate conditions, private equity firms need to position Environmental, Social, and Governance (ESG) strategies at the core of their business operations. By setting up an effective ESG strategy, private equity firms will be better equipped to address certain ESG issues, such as climate risks, biodiversity, net zero emissions, etc., that may affect the success of the firms’ investments.

In addition, a strong ESG strategy can be incorporated as a map to help private equity firms source and serve businesses that positively impact the environment and social space. With this map, the firms will be positioned to build and prioritize investment initiatives relevant to investors, securing a sustainable future.