From short-term profits to long-term value: Incorporating ESG in private equity : A qualitative analysis of ESG implementation into the investment process of Nordic private equity firms

Sammanfattning: The concept Enviromental, Social and Governance (ESG) has become an issue of growing importance and relevance, with sustainability-related investments soaring in the recent decade. In Sweden, private equity represents a large portion of the capital markets. As a result, private equity is an intriguing case study in developing ESG investments. This thesis analyzes how different Nordic private equity companies work with ESG within the investing process. The fundamental causes of ESG's ascent and the momentum of the investing theme were found via a qualitative study based on semi-structured interviews with eight private equity associates and seven with traditional- and investment banks. According to the findings, the current incentive is driven by more significant knowledge of ESG-related risks and possibilities, altering personal beliefs and legislative expectations. Given the sector's possibility to influence change inside their investment firms via governance-, operational-, financial-, and ESG-methods, the respondents found a point of agreement in their confidence that ESG would have a substantial long-term influenceon the private equity industry. Even though the private equity industry is aware of sustainability, stakeholders have yet to agree on definitions and the most effective ways to incorporate it into investment operations. ESG is virtually entirely evaluated for typical private equity firms during the pre-investment process, often known as the screening phase. While specialized sustainability and impact partners are integrated across the investment process, their peers may learn from them since they have successfully done so. The disparity among stakeholders illustrates that private equity sustainability is still a work in progress, driven by the varied stakeholders' specific interests and aspirations.