The Performance of ESG-Oriented Private Equity Funds: A Quantitative Analysis

Abstract

Sustainable development and environmental, social and governance (ESG) factors are playing an increasingly important role in the investment industry. The potential of private equity funds in this context is very large due to the characteristics of this asset class. However, the question that arises is whether or not the ESG orientation of private equity funds can lead to a better performance. To answer this question, three types of analysis are carried out in order to estimate the average effect of an ESG orientation on private equity fund performance, namely a simple OLS regression analysis, a multiple OLS regression analysis, and propensity score matching (PSM). These analyses are all carried out for two different performance measures, namely for the Total Value to Paid-in Capital (TVPI) multiple and the Net Internal Rate of Return (IRR).