Principal Investors and Private Equity
Private equity is becoming a powerful change agent for driving progress on ESG, climate, and sustainability. BCG helps private equity funds and principal investors create outsized value by integrating sustainability considerations at each stage of the investment life cycle.
ESG has rapidly become a key source of differentiation and value creation for private equity funds, with the potential to unlock lasting benefits. Funds at the forefront of the application of ESG in private equity see significant financial returns from their investments, including stronger sales, lower costs, higher employee engagement, and—ultimately—superior valuations.
Not all ESG factors are financially or socially relevant to every business. Our philosophy: It’s not about doing everything in ESG and private equity. It’s about doing the right things. And doing them well. BCG partners with funds to examine sustainability topics at each step in the investing journey, from formulating strategy to navigating regulations, and due diligence to portfolio value creation.
Our Approach to ESG in Private Equity
BCG is a leader in advancing sustainability agendas, with experience on more than 1,600 groundbreaking projects across all major industries and geographies. Our teams have helped clients decarbonize multi-billion-dollar supply chains, decommission oil rigs in the North Sea, and achieve factory-level circularity transformations. Our extensive sustainability experience across industries, together with our deep engagement in the private capital industry and our expertise in fully integrating ESG priorities, enables us to create value for clients in four primary areas:
- Fund Strategy and Operations. We help private equity funds define and operationalize their sustainability ambitions across the fund.
- Sector Scans. We identify attractive investment opportunities in industries where megatrends in sustainability are reshaping profit pools.
- ESG Diligence. We include sharp perspectives on sustainability as a driver of value in each commercial diligence.
- Portfolio Value Creation. We engage deeply in the portfolio, conducting portfolio scans to identify opportunities and leading sustainability transformations.
Our Clients’ Success with ESG in Private Equity
A waste management company sought to drive growth through ESG. In six weeks, our team analyzed ESG trends affecting the waste management space and identified six priority initiatives. The company is on track to achieve a 30% increase in enterprise value (from £270 million to £350 million), generating value from electric vehicle battery processing, tire and waste plastic pyrolysis, and green steel.
The Xella Group—a leading manufacturer and supplier of building and insulation materials—sought to develop a robust ESG strategy that would reduce costs, improve profitability, and establish its reputation as an ESG leader. In ten weeks, BCG helped the company update its ESG strategy and develop ambitious targets. Xella's expanded EBITDA margins are on track for a payback period of less than 3 years.
How We Support Private Equity’s ESG Priorities
BCG is at the forefront of supporting the private equity industry on sustainability topics:
- The ESG Data Convergence Initiative generates useful, performance-based, comparable ESG data for the private equity industry.
- We are a partner to the Sustainable Markets Initiative, which enables the private sector to accelerate its transition to a sustainable future.
- BCG’s CO2 FI solution allows investors to measure greenhouse gas emissions financed by their investments.
- CO2 AI, with 130 million tons of Co2e under management, enables investors to measure, track, and reduce their portfolio’s environmental footprint.
- BCG has a unique seat at the table with world leaders on climate and sustainability, serving as an exclusive consulting partner to COP 27, World Economic Forum’s Net Zero Challenge, World Wildlife Fund, Science Based Targets initiative (SBTi), and more.
BCG Named a 2023 Global ESG & Sustainability Strategy Consulting Leader
IDC MarketScape evaluated 16 consulting firms, recognizing BCG for its strengths in CO2e mitigation, climate risk, materiality assessments, a growing social pillar platform, and a strong partner ecosystem.
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Our Partnership for Private Equity and ESG
The ESG Data Convergence Initiative (EDCI) is a first of its kind, industry-led effort by the private equity community to drive convergence of meaningful ESG metrics, and generate comparable, performance-based ESG data. BCG has supported the EDCI since its inception since 2021, and now our firm has taken on the role of the initiative’s long-term benchmarking and advisory partner.
BCG’s Partnership with EDCI
BCG’s Vinay Shandal discusses the importance of ESG data and our partnership with the ESG Data Convergence Initiative (EDCI) along with the impact of ESG metrics for the private equity sector.
Implementing Standardized ESG Metrics to Improve Data Transparency
Private equity experts discuss the progress the EDCI has made in the industry to improve both the volume and the quality of ESG data—which in turn, better positions the industry to help its clients.
Our Insights on Private Equity and ESG
Report
Hundreds of PE firms have reported data detailing the progress that their portfolio companies are making on social and climate-related issues. The results are encouraging.
Article
To help the world reach net zero, investors need a clear and pragmatic way to gauge the carbon impact of the solutions they fund.
Report
Our latest research shows that consumers are embracing alternative proteins and that protein transformation is one of the best tools available to combat the climate crisis.
Article
An unprecedented effort by private equity firms offers data-driven insights into the progress private companies are making against their ESG goals.
Read more on ESG and private equity
Meet Our Private Equity ESG Experts
BCG’s private equity consultants have deep expertise at the intersection of ESG and private equity. Here are some of our experts on the topic:
Claudia Hobl-Felbermayr
Partner and Associate Director
Vienna
See more of the team
