Will the PE industry’s Increase Impetus on ESG save the Earth?

Private equity firms are increasing their impetus on ESG in the wake of green consumerism.

3 min readJul 9, 2020

Carlyle Group Inc. bought Weiman Products, a company that sells harsh chemical cleaning products and make kitchen appliances streak-free and removes dried paint. Thereafter, the private equity firms’ executives set off on the path to change products and even company space. Now the products of the company emphasize sustainability and appeal to eco-conscious shoppers. The business has improved and the company should get positive

This is a general process in the world of private equity. Investors like Carlyle will tout an increase in revenue and profit margins. What’s more, Carlyle wants to position the deal as proof of its commitment to fight climate change. Additionally, prove the industry that money-hungry private –equity investors can be a force to progress.

Megan Starr, the head of the impact, Carlyle Group, New York, says, “Weiman will worth more upon exit due to the focus on sustainability of their products”.

Starr is responsible to push environmental, social, and governance (ESG) Strategies throughout the group’s $217 billion portfolios, irrespective of whether businesses are easy to square with a commitment to the climate.

This makes Carlyle’s approach different from its rival private equity firms such as KKR& Co. and TPG Capital. While other firms have set up dedicated impact funds that target renewable energy and sustainable ventures. Carlyle Group, on the other hand, invests in military equipment, fossil-fuel production, and cleaning chemicals that will make a better world.

The problem for private equity’s push into ESG is what can be done to address business in all kinds of controversial areas, says Mark Campanale, founder of the Carbon Tracker Initiative. “I think the answer to that is ‘not very much,’ so long as pension funds and insurance funds still want to allocate to that area.” That legacy, for Carlyle, includes a minority stake in Combined Systems, a manufacturer of tear gas.

Mark Campanale, Founder of the Carbon Tracker Initiative, says, private equity firms are increasing push into ESG. The motive behind doing this is to address business in controversial areas. However, he suggests, there’s “not very much” that PE firms can do, as long as pension funds and insurance funds allocated to that area. Adding to that, Carlyle has a minority stake in Combined Systems, a manufacturer of tear gas.

ESG movement aims to discourage investment in companies that generate greenhouse gas emissions. Carlyle Group is amongst a group of investors that believe in the ability to bring positive change. They do this without screening out companies that do poorly on ESG measures. This raises a big question for the private equity industry: Can private equity investments in products that aren’t good for the environment could drive us toward a change for good?

In 2018, there wasn’t a single green product sold by Weiman. Following suit, Unilever NV and other businesses have started moving aggressively to become more like businesses that idealistic millennials want to work for and environmentally –conscious shoppers want to buy from.

Before Carlyle Group bought Weiman in March 2019, the company was sitting on the rise of green consumerism.

In the last few years, ESG funds have increased exponentially and private capital has started moving in. KKR and TPG Capital have $1 billion and $2 billion for their Global Impact Fund last year and Rise Fund respectively. About one-third of U.S. private equity firms plan to modify their portfolios due to climate change, a report from PE firm Coller Capital says. 3 out of 5 European and Asian private-equity investors are planning a similar shift.

📫 My other Stories on Private Equity:

Will the PE industry’s Increase Impetus on ESG save the Earth?

Private equity firms are increasing their impetus on ESG in the wake of green consumerism.

📫 My other Stories on Private Equity:

Written by Chris Gilbert