LGT Capital Partners 2024 ESG Report Shows Private Equity Making Huge Strides
The 2024 ESG Report brought out by LGT Capital Partners puts in focus the sea change seen across the private equity space with respect to ESG. A decade ago, it was only 27% of private equity managers who had strong ESG processes in place; this has now shifted to 73%.
According to Tycho Sneyers, the Managing Partner of LGT Capital Partners and independent Board Member of the PRI, ESG practices transform value: “ESG practices can immensely add commercial value by aligning portfolio companies with industry transitions to net-zero,” Sneyers explained. “They secure advantages through proactive regulatory compliance, improving operational efficiency, enhancing talent acquisition, customer engagement, and market share, and boosting competitive positioning.
Global Trends in ESG Excellence
The report reveals that Europe remains supreme in the excellence of ESG standards, at 51% of rated “excellent” private equity managers, versus 42% in 2023. So obviously, Europe is ahead of others in maintaining ESG standards. Compared to this, Asia and the US are lagging in the sector. Only 34% of private equity managers within Asia and 16% in the US were rated “excellent,” thus showing slow progress in these regions.
One of the top trends this year is growing awareness and implementation of DEI policies. As per this report, in 2023, 74% of private equity managers are formalizing DEI policies, rocketing from just 60% in the previous year. This surge exemplifies an increasing realization toward infusing DEI goals in the investment universe across all asset classes.
Climate Action and Decarbonization Efforts
On climate action, LGT Capital Partners remains very proactive and has decided to enlarge its climate action framework with the help of forward-looking information. The firm categorized companies in terms of their effort toward decarbonization. According to the report, 42% of companies globally are currently working on decarbonizing, while 35% are aligning respective strategies with net-zero goals.
Sneyers emphasized the commitment of the firm towards constant climate action: “At LGT Capital Partners, we believe driving ESG requires intensive engagement with the real world. For us, to create genuinely sustainable investment portfolios is a long-term process with no endpoint.” Incremental improvement year-on-year delivers real outcomes over time.
Challenges and Areas for Improvement
While the report has been able to demonstrate progress, LGT Capital Partners is aware that problems persist concerning the tracking of emissions and how to act on the climate. As the firm’s results stand, while many private equity managers are progressing in ESG integration, ample space for betterment is available.
The report highlights that there is still much to be done in terms of emission tracking and proper climate action implementation. As the industry continues to transform, the duty falls to the private equity managers to improve these areas to attain and better their ESG performance.
A good omen for the future of sustainable investing is that private equity managers are increasingly showing more commitment towards ESG practices. The growing recognition of the need for investment strategy to be aligned with goals related to the environment and society reflects in the reporting. However, this increasing trend requires managers to become equally vigilant and proactive about the challenges arising in ESG integration.
In summary, the LGT Capital Partners 2024 ESG Report indicates that it is on a very promising trajectory as far as sustainability and responsible investing in the private equity industry are concerned. An increase of this magnitude in managers having in-depth ESG processes, appreciable gains on DEI awareness, and focused efforts on climate action demonstrate positive shifts toward a sustainable future. As this sector grows further, continued efforts and enhancements remain critical to effecting meaningful, lasting transformation.