Private equity managers are increasingly embracing Environmental, Social, and Governance (ESG) standards, with a significant rise in robust ESG processes from just 27% a decade ago to 73% in 2024, according to LGT Capital Partners’ latest ESG Report. This shift highlights the growing importance of sustainability in portfolio management and the broader investment landscape. 

Europe is at the forefront of this transformation, with 51% of private equity managers achieving an “excellent” ESG rating, up from 42% in 2023. This positions Europe as a leader in ESG excellence, while progress in Asia and the US remains more gradual, with only 34% and 16% of managers, respectively, earning top ratings. 

The report also reveals a significant surge in Diversity, Equity, and Inclusion (DEI) awareness. In 2024, 74% of private equity managers have formalized DEI policies, marking a substantial increase from 60% in 2022. This trend underscores the growing recognition of DEI as a crucial component of ESG integration in portfolio management. 

Tycho Sneyers, Managing Partner at LGT Capital Partners, emphasized the commercial benefits of ESG practices, noting that they align portfolio companies with industry shifts toward net-zero, enhance operational efficiency, and improve competitive positioning. As climate action remains a top priority, LGT Capital Partners has expanded its framework to include forward-looking information on companies’ decarbonization efforts, reflecting a broader industry focus on sustainability. 

As the global investment community continues to prioritize ESG in portfolio management, the findings from LGT Capital Partners’ 2024 report demonstrate a clear commitment to integrating ESG standards, with notable progress in Europe and growing awareness in DEI across the industry. The evolution of ESG practices is set to reshape portfolio management, driving long-term value creation and sustainability. 

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