Creating Value through Sustainability in Private Markets

The document outlines how private equity general partners (GPs) and limited partners (LPs) can move beyond compliance to capture financial value through sustainability. It identifies four primary value-creation strategies: investing in sustainability leaders, providing sustainability-as-a-service, shifting entire portfolios, and transforming sustainability laggards. The report emphasizes the need for organizational shifts—including installing operational champions and integrating sustainability across the investment life cycle—and calls for the industry to lead 'grey-to-green' transformations of high-emitting assets rather than relying on divestment. It also highlights the importance of standardized measurement, citing the ESG Data Convergence Project as a key initiative to create comparable material sustainability data.

• Private equity investors can capture financial value through four main sustainability strategies: investing in sustainability leaders, 'Sustainability-as-a-service' (investing in transformation service providers), continuous portfolio-wide improvement, and the transformation of sustainability laggards.
• Sustainability creates value through three primary drivers: direct P&L impacts (protecting/increasing revenue or reducing costs), enhancing the long-term viability of operating models (such as improving employee retention), and achieving valuation premiums at exit due to a scarcity of high-performing sustainable assets.
• To effectively capture sustainability value, firms must implement organizational changes, including shifting culture away from mere reporting, installing senior champions with operational expertise, and embedding sustainability into every stage of the investment life cycle from origination to exit.
• The private equity industry has largely failed to capitalize on its ability to transform 'grey assets' (high emitters), instead relying on sector screening and divestment, which may leave these assets under less responsible stewardship.
• Specific barriers hinder the decarbonization of heavy emitters, including 'levels-based' emissions targets that disincentivize the acquisition of high emitters, the presence of funds that harvest cash flows from emitting assets, and the risk of assets becoming stranded due to a lack of clear policy trajectories.
• Measurement remains a critical obstacle; the ESG Data Convergence Project, launched in September 2021 by CalPERS and Carlyle, aims to standardize reporting across six key metrics: Scope 1 and 2 GHG emissions, renewable energy, board diversity, work-related injuries, net new hires, and employee engagement.

APA

World Economic Forum (2022). Creating Value through Sustainability in Private Markets. https://www3.weforum.org/docs/WEF_Creating_Value_through_Sustainability_in_Private_Markets_2022.pdf

Chicago

World Economic Forum. Creating Value through Sustainability in Private Markets. 2022. https://www3.weforum.org/docs/WEF_Creating_Value_through_Sustainability_in_Private_Markets_2022.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Creating Value through Sustainability in Private Markets |date=April 2022 |url=https://www3.weforum.org/docs/WEF_Creating_Value_through_Sustainability_in_Private_Markets_2022.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2022creating, author = {{World Economic Forum}}, title = {{Creating Value through Sustainability in Private Markets}}, institution = {World Economic Forum}, year = {2022}, month = apr, url = {https://www3.weforum.org/docs/WEF_Creating_Value_through_Sustainability_in_Private_Markets_2022.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }