According to Harvard Business Review:
Portfolio Companies demand an ESG focus
ESG is top of mind for employees and customers of most companies. The best business operators understand this. So, ESG is top of mind for them too.
Harvard Business Review cites the following as some of the reasons ESG is so topical:
Increasing social awareness around climate change
Social expectations on diversity and inclusion
Pressure from public companies where private companies act as supplier
An understanding that better ESG management can boost valuations of private companies
The fear of increasing regulatory oversight seeping into the private markets
There is clear incentive for private companies to focus on ESG. But, these generally smaller companies need guidance. They look to potential private equity partners for that help.
Private equity firms are competing for deal flow. An informed approach to ESG can help differentiate your firm.
From the same HBR article:
“Many of the GP representatives we talked to, especially those who were sophisticated about ESG, said that a commitment to sustainability was a selling point and a differentiator in their negotiations with potential portfolio companies that are being targeted by multiple GPs.”
Distinguishing yourself as an ESG forward firm is not as difficult as it may seem. See how leading PE firms do it in An Analysis of PE Firms leading the way on ESG
Here's a preview:
They adopt the On-Demand Impact Transparency Framework by Corecentra.
The Harvard Business Review article referenced herein can be found here