EQT: Private Equity with a Purpose

Posted by Robert Eccles (University of Oxford), Therese Lennehag (EQT Partners), and Nina Nornholm (EQT Partners), on Wednesday, November 25, 2020

Editor’s Note: Robert G. Eccles is Visiting Professor of Management Practice at Oxford University Said Business School; Therese Lennehag is Head of Sustainability at EQT Parnters; and Nina Nornholm is Head of Communication at EQT Partners. This post is based on their recent paper, forthcoming in the Journal of Applied Corporate Finance. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); Toward Fair and Sustainable Capitalism by Leo E. Strine, Jr (discussed on the Forum here); and Socially Responsible Firms by Alan Ferrell, Hao Liang, and Luc Renneboog (discussed on the Forum here).

The private equity (PE) industry has grown enormously over the past 20 years, from roughly $650 billion in assets under management (AUM) in 2000 to almost $5 trillion in September 2019 (of which some $1.7 trillion is now “dry powder”), an increase of 16% from the prior year and a more than seven-fold increase from 2000. In comparison, the Dow Jones Industrial Average has not even tripled over that period, even when using its peak before the COVID-19 induced crash.

There are consequences to this size. Limited partners (LPs) have become dependent upon the returns earned in PE, although there are questions whether the industry will continue to earn them in the future. This asset class has grown large enough that it is also raising questions about its contributions to systemic risk, such as climate change and income inequality. To date, there is little transparency on these and other sustainability issues at either the General Partner (GP) or portfolio company (PC) level. Questions are also being raised whether PE firms are paying their fair share of taxes. Unless addressed, the PE industry can again come under increased scrutiny and face questions about its license to operate.

(more…)

Read Previous

Brussels criticised for handing BlackRock €280,000 green contract

Read Next

FS/KKR Advisor Announces Proposed Merger of FS KKR Capital Corp. and FS KKR Capital Corp. II

Most Popular

We use cookies to offer you a better browsing experience. If you continue to use this site, you consent to our use of cookies.
We use cookies to offer you a better browsing experience. If you continue to use this site, you consent to our use of cookies.