Private equity fund managers are prioritizing impact funds and ESG above new deals according to BDO’s Spring 2022 Private Capital Pulse Survey.

The survey of 200 US private equity fund managers saw 99% of respondents saying they have already identified an ESG strategy and 50% say they will direct the most capital toward setting up impact funds or investing in targets with ESG-focused themes. This compares with 14% who said they would direct the most capital to applying equity relief to portfolio companies and 12% who said they would direct the most capital to new deals.

“Limited partners and the public at large have been clamoring for ESG action, and funds are responding. As funds take a more hands-on approach to value creation, they become more than just a financial lifeline for their portfolio companies; they become a strategic partner, committed to the business’s long-term success: Among the fund managers who said they are raising an impact or ESG fund, 46% said their top post-M&A challenge was improving performance,” said Verenda Graham, Tax Partner and National Private Equity Practice Co-Leader. “Funds may choose to invest in companies that perform well on ESG metrics — and make them even better — or they may choose to partner with businesses where managers can leverage their ESG know-how to help portfolio companies improve their ESG posture.”