ESG Transparency of Private Equity and Debt Firms

Pascal Böni

Tilburg University | School of Economics and Management - Tilburg Institute for Private Debt, TiPD; Tilburg University | TIAS School for Business and Society

Jurian Hendrikse

Tilburg University

Philip Joos

Tilburg University; TIAS School for Business and Society

Abstract

Institutional investors’ exposure to private market funds exceeds 12 trillion US dollars. Despite this and contrary to public markets, little is known about the extent and determinants of ESG transparency in private markets. Using a novel dataset, we investigate ESG disclosures in the increasingly important private equity and debt markets. Consisting of 4150 private equity and private debt firms and capturing 82% of the global PE and PD funds raised over the past 10 years, our sample allows us to investigate 37 ESG disclosure indicators that are most relevant to the setting of private capital markets. We find an overall low and heterogeneous level of ESG disclosure. The median GP discloses only 8% of the available ESG indicators, implying that GPs are significantly less transparent than public firms. Larger, listed, older, and more recently fund-raising GPs, as well as GPs headquartered in Developed Europe are more transparent. Analyzing firm-, portfolio- and asset-level ESG transparency, we provide evidence that portfolio-level ESG characteristics as well as a GP’s investor base are each significantly associated with GPs’ ESG disclosures.