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Buyout Giants Draw More Than 200 Investors to a Key ESG Effort

(Bloomberg) —

A year after California Public Employees’ Retirement System and Carlyle Group Inc. started an effort to collect sustainability data on private equity, 215 investors have joined as they seek to determine how it will shape returns moving forward.

Information has been collected from more than 2,000 companies owned across the investors’ portfolios. And while some areas of environmental, social and governance efforts have seen progress — others have stalled.

BCG, the consultant hired to aggregate the data, found that the industry has largely lagged on the number of women on boards when compared with public counterparts. Closely held firms were able to create jobs at faster rates than public companies, and reduce greenhouse gas emissions more quickly. 

“We’ve ended up with a much more rich data set for private markets that we flat out have never had before,” Meg Starr, the global head of impact at Carlyle, said in an interview.

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ESG improvements could ultimately drive financial returns, according to BCG’s report. It said that private companies with a woman on their boards, for example, have had higher growth rates than other firms. It’s too early to make definitive conclusions from the the data, BCG said. 

“There are areas where we have not been as good as an industry,” Starr said. “Board diversity is a clear one, I think, that sends a message to general partners that this is an area where you can really differentiate.”

On the workforce front, private equity-backed firms have been able to create jobs at up to three times the rate of public companies, Starr said. 

“PE is frequently maligned, if you paint it in the broadest brush strokes, this idea that buyouts come in and destroy jobs,” she said. “The popular narrative is so different than what the data actually shows.”

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