Since the establishment of the UN’s World Commission on Environment and Development, sustainable development has been gaining momentum in the private equity (PE) industry. Sustainable development refers to development that meets the economic and social needs of the present without compromising the ability of future generations to meet their own economic and social goals.

The acceptance and spread of the sustainability concept globally has led to the development of new laws, regulations, industry standards and policies, and has even prompted the creation of new investment products such as green bonds and green loans. In the PE industry, the desire to embrace sustainability has led to an increase in firms and funds coming to the market that are dedicated to addressing the environmental or social aspects of sustainable development in their investment processes. For traditional PE firms, responsible investing has become more of a stated priority for the investment decision-making process of both PE sponsors (i.e., general partners (GPs)) and their investors (i.e., limited partners (LPs)).