Are ESG issues taken into consideration in the investment activities of Private Equity firms - A research case about Importance of Environmental, Social and Governance factors in Private Equity firms between the US and Luxembourg

Abstract

This summary examines the extent to which ESG considerations are taken into account by Private Equity firms in their investment decisions. The study discusses how cultural and institutional differences between the United States and Luxembourg influence these decisions. The research investigates the degree of integration of Environmental, Social and Governance factors into investment decision making processes of Private Equity (PE) firms in both United States and Luxembourg. A qualitative analysis based on twelve industry experts interviews has been used in this study to shed light on why PE firms integrate ESG factors. The main findings highlight a growing recognition by both US and Luxembourg based private equity organizations that ESG issues matter but with different degrees of emphasis. Integration of ESG principles is often driven by investor’s demand and government regulations expectations while it is mainly influenced by them in Luxembourg due to the strong regulatory framework as well as their cultural commitment towards sustainable development. In conclusion, our research findings show that indeed, Private Equity firms take ESG factors seriously when investing, which is influenced by cultural and institutional disparities between these two countries