Sustainability in Private Capital Investing: A Systematic Literature Review

Abstract

The private capital asset class has grown to over $10 trillion in assets under management and has significant potential to contribute to environmental, social, and governance (ESG) goals. However, there is a dearth of academic research about ESG with regards to private capital investing. This literature review adopted a mixed-methods approach, combining a quantitative (bibliometric) analysis with a qualitative review of the articles. It was found that less than 1% of the literature, written in English, between 1960-2020 on private equity and venture capital addresses topics related to sustainability. It was also observed that the 46 papers which address sustainability topics can be categorized into 13 themes, including certifications and standards, impact investing, and corporate social responsibility. Investment in private securities grew at twice the rate as public securities during the end of this time-period and interest in sustainability integration in private capital investing is growing. Incentives for private equity and venture firms to engage with sustainable investments are being driven by institutional investors, such as pension funds and insurance companies. The focus of sustainability research has typically been on public markets, hindering the potential of private capital investment to influence sustainable policy and practices. The objective of this paper is to provide evidence of the dearth of academic literature on the topic of private capital markets and sustainable investment, while identifying current themes in the existing literature so that future work may address gaps in research.