*All graphs and figures are taken directly from the report, which was sponsored by 500 Startups.
368 people responded to the survey, of which 157 were GPs, 63 LPs, 32 both GPs and LPs, and 116 with a different classification. 650 individuals answered at least one question. The results represent eight geographical zones. For the purposes of clarity, sustainable investments include both impact investments and anything relating to the integration of environmental, social, and governance (ESG) factors.
The analysts note that there is a reporting bias built into the survey; most respondents reacted positively to sustainability concerns, while very few refused to acknowledge any value in them. Thus, it is difficult to say that all results are representative of the industry at large.
Most (80%) of participants listed social and environmental concerns as the driver behind their sustainable investing practices. This was followed by improved long-term results, diversity and inclusion, risk management, and brand/reputational risk. Very few (10%) noted costs as a factor contributing to their decision. The most important strategy for GPs was tackling issues at a level of the firm via a unified strategy. LPs placed slightly more emphasis on setting goals for their program (see graph).
With regard to challenges, both GPs and LPs were most perplexed when confronted with the vacuous nature of what sustainable investment is. The difficulty of measuring impact was listed as the most pressing challenge, followed by the possible perception of negative impact on returns (see graph). LPs in particular were skeptical when confronted with the lack of data for the effect of ESG factors on private equity outfits. Very few seemed to think that the opportunity for investment was too small.
55% of GPs claim to have already integrated sustainability throughout their program, while only 29% of LPs report having done so. Rather, 58% of LPs are in the process of exploring what sustainability would mean for them, with slightly less than half of them having a team dedicated to delving deeper into the issue. Of all participants, an average of 12.5% has neither a program nor the intent to form one. From no category was the proportion of respondents claiming to have programs running for five or more years greater than 30%. Non-GP/LP respondents had the highest percentage of answers indicating a total lack of a sustainability program (see graph). 46% of respondents noted that less than 25% of their clients were working on their own sustainability initiatives, whereas only 9% had more than 75% doing so.
When asked to rank their perception of critical factors on a scale of one (performance) to nine (sustainability), the survey found that LPs reported an average value of 4.37, indicating a slight preference for performance. Yet only 3% of respondents said sustainability is the only important factor, while only 13% said that performance is the only important factor (see graphs). 37% of asset managers claimed to be satisfied with the incorporation of ESG factors into their risk framework, while an equivalent proportion felt that their metrics needed improvement. 74% of both GPs and LPs feel that they will increase their attention to ESG factors in the coming year.
42% of fund managers considered all their strategies to be impact offerings, while 25% of LPs have all their investments in impact strategies, and 27% of the other service providers focus all their work on impact investing (see graph). The social interest in impact investing has also been changing. GPs reported having received more requests for information related to sustainability from LPs. 69% said interest has either increased or remained consistently high level. 40% of asset managers claimed that over 50% of clients and prospects mentioned it, while only 9% had none even touched upon the subject.
While pressure to consider sustainability concerns increased for most actors, some (6% of LPs, GPs, or both; 15% of other participants) felt that the topic had been temporarily eclipsed by other issues, i.e. the pandemic. Some respondents noted a spike in attention being paid to sustainability during the BLM protests, as the theoretical connection between environmental awareness and racial justice was made. Probably in no small way related to stay-at-home orders, 64% get their information about sustainability from webinars or conferences.
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