Belgian private equity’s ESG journey: From compliance to value creation

Global Private Equity Responsible Investment Survey 2021

Setting the scene

The World Economic Forum’s 2021 Global risk report highlights again that extreme weather events, biodiversity loss, environmental damage linked to humankind and climate action failure represent the biggest risks to business. Together with the COVID-19 crisis of the past 18 months, government and business have received a stark wakeup call. If we’re going to prevent further pandemics, reduce the risks of climate change, build a more equitable society and still generate growth, it’s clear that we must create more sustainable economies and systems. Stakeholders are demanding it too, as witnessed by shareholder revolts, climate demonstrations on the streets of Belgium and students calling for the government to take action against climate change.

Businesses all over the world are reacting and shifting environmental, social and governance (ESG) issues to the centre of strategic concerns. They’re acknowledging ESG as a driver of value creation and are rapidly developing a proactive ESG mindset. PwC’s latest Global Private Equity Responsible Investment Survey demonstrates that Belgian private equity (PE) is on the same journey.


Sustainable investing encompasses a broad spectrum of approaches ranging from negative ESG screening, which disqualifies investments based on a set of criteria, to ESG investing, in which ESG considerations are an overlay to the pursuit of financial performance. In recent years we have seen the addition of impact investing, where investors assess the total contribution of an investment to a more sustainable future. As the financial sector begins to align on vocabulary and methodology and increases its ESG literacy and capacity, we see PE firms putting ESG at the heart of their business strategy. This aim is clear: to invest in the game changers of the new sustainable economy. 

Our survey shows, for the first time, how Belgian PE firms are adopting sustainable investing:

  • Integrating ESG in strategy and policies 
  • Creating value for investors and society
  • Taking action on ESG issues



The Global Private Equity Responsible Investment Survey explores the views of general partners and limited partners in responsible investment among global private equity firms. This year, 209 firms from 35 countries and territories responded, of which 28 were Belgian or have a Belgian footprint. Of these, 198 respondents were general partners and 41 were limited partners (22 and 14, respectively for the 28 Belgian respondents). Some respondents were both general and limited partners. The vast majority (81%) came from Europe. We believe this may be because European firms have spent the past few years adapting their strategies and investment activities to EU regulations which require robust ESG disclosure throughout the financial services landscape. This level of adoption and adaptation is reflected in the survey findings.


Belgian PE firms integrating ESG in their strategy and policies

As the results of our latest global survey found, PE firms have entered a new phase of maturity. Once considered a side issue in compliance, or a niche product for a small minority of investors, responsible investment has now become an overarching framework that informs the strategic thinking of the entire firm. Our successive surveys over the past 7 years show an increasing focus on ESG integration at firm level and throughout the whole investment cycle. Surveyed for the first time, we see that the Belgian PE landscape is also catching up on responsible investment.

collection of data in private equity percentages

Similarly to Global respondents, we can see that a vast majority of Belgian PE firms have adopted ESG tools and policies formalising their ESG approach. This maturity is driven by two main dimensions: their own corporate values and value creation opportunities.

When making investment decisions, ESG factors are now routinely evaluated by private equity firms. At global level, three quarters (72%) of respondents always screen target companies for ESG risks and opportunities at the pre-acquisition stage, and more than half (56%) have turned down a potential investment or refused to enter into an agreement on ESG grounds. In Belgium these figures are 35% and 39% respectively, demonstrating that ESG can be a decisive factor leading to the rejection of an investment on ESG grounds.

The biggest gap in maturity, compared with global, is that Belgian PE firms do not systematically integrate ESG considerations into their committee papers and investment thesis (e.g. how ESG influences enterprise value and/or multiple).

Who manages ESG in Belgian PE firms?

Belgian PE firms tend to prefer giving ESG responsibilities to a committee rather than assigning responsibility to a specific partner or a dedicated ESG officer. This indicates that in Belgium, which counts not only PE partnerships but also many family offices, there is a tendency to prefer shared responsibility in such a new domain which is clearly gaining in importance. Consequently, the ultimate responsibility for ESG/RI lies more often with an ESG committee as opposed to a Partner compared to respondents at a global level.

private equity belgian graph

*i.e. someone with other responsibilities as well/drawn from another team

Where responsibility lies for management of RI / ESG matters, Belgian PE firms benchmarked against global respondents

Over half of Belgian respondents indicate that their whole investment team received training on responsible investment, compared to 86% of respondents worldwide. Preferred methods are on the job training and internally facilitated training. Training is crucial as investment teams are then adequately equipped to collect and process information reported by portfolio companies. It also minimises the risk of missing material information and ensures that ESG is put right at the heart of the investment decision. In addition, internal or external ESG teams can complement the analysis and support in performing deep dives on certain key topics and engage with portfolio companies on material issues.


Creating value for investors and society

The past few years have seen a fundamental shift in focus within PE when it comes to ESG strategy and implementation. 26% of the Belgian PE firms surveyed have committed to the Principles for Responsible Investment supported by the United Nations, with an additional 30% considering doing so within the next year. This highlights that PE firms have come to realise that ESG offers a real business opportunity, which requires the integration of ESG thoughts and reflections throughout the deal cycle. There’s increased recognition of the value creation opportunities arising from the transition to sustainable business, and ESG is acknowledged as a driver for transformation, along with other drivers such as digitalisation. Notably, more than a third of Belgian respondents (39%) have either refused to enter an agreement with a general partner or turned down a potential investment on ESG grounds. 

We see that PE firms in Belgium are driven by largely the same factors as firms elsewhere, although contrary to global respondents Belgian PE firms are driven more by corporate values than value creation opportunities. One reason for this is potentially a lack of experience in valuing ESG performance at exit.

key drivers of esg ri activity graph belgian vs global

Key drivers of ESG/RI activity, Belgian PE firms benchmarked against global respondents

ESG is having a growing influence on business strategy throughout the transaction life cycle and across portfolios. Firms are using ESG criteria not just to assess risks and identify value creation opportunities, but also to manage their portfolio and ultimately deliver a better investment at exit. One good example is the adoption of or alignment with the sustainable development goals (SDGs) as a framework. Investors and companies are finding the SDGs increasingly useful because they offer a universal approach to realising positive societal outcomes and provide a level of rigour by identifying 17 overarching goals and 169 targets. They also offer an outcomes-based framework at a time when firms and companies are trying to come to terms with many competing ESG evaluation initiatives.

use of esg as an initiative private equity belgian vs global

Use of SDG as an initiative, Belgian PE firms benchmarked against global respondents

The SDGs form a universal call to action to end poverty, protect the planet and ensure all people enjoy peace and prosperity; they seek to tackle issues such as climate change, sustainable consumption and economic inequality, among others. The SDGs provide a comprehensive approach which can strengthen investors’ ESG strategy, by helping to identify companies making a contribution to facing society’s most pressing challenges.  

In Belgium this practice is not yet as widely taken up by PE firms, while according to the FSMA latest study more than 70% of Belgian quoted companies have taken up the SDGs as one of their frameworks. The SDGs are generally used to identify the relevant SDG contribution of portfolio companies, and less so at house level. Finally, Belgian PE firms have less articulated KPIs for reporting against SDGs.

The growing interest in impact investing and the emergence of mainstream impact investing strategies is a key point to be noted. This change has no doubt come about because firms are starting to understand that investors value funds that offer positive environmental and social impacts, given the now obvious fragility of our natural world and the interwoven fabric of our global society. The PE business and ownership model is well-placed to better engage with investments and drive change. Additionally, according to the Global Impact Investing Network, PE is the most common asset class in the impact investing industry, and a clear majority of PE-focused investors (86%) reported performing in line with or exceeding their financial performance expectations.

Contrary to global respondents, no Belgian respondent indicated having an impact fund. Yet half of Belgian respondents (52%) indicated that their responsible investment strategy considers the ‘creation of positive impact’ along with the management of RI issues, i.e. investing for environmental or social impact as well as financial returns (impact investment*). This is only slightly less than the global score: 57%

Overall, the idea of investing for impact is becoming a more prevalent strategy within PE, and PE appears to be getting ‘impact ready’ and trying to prove to investors that they can invest for impact without sacrificing returns.

investment belgian vs global private equity graph

Does the responsible investment strategy consider the ‘creation of positive impact’ along with management of RI issues (i.e. investing for environmental or social impact as well as financial returns), Belgian PE firms benchmarked against global respondents)

Taking action on ESG issues 

Employing a comprehensive ESG strategy requires firms to consider a wide range of specific, but often interconnected factors that could negatively or positively affect portfolios and the overall success of the business.

Significant gaps remain between concerns about individual ESG issues and the actions being taken to address them. In cases where ESG issues have long been a governance concern or are mandated by regulation - such as occupational health and safety, or preventing bribery and corruption - the gap is small. However, on issues that are fast becoming business-defining in the post-pandemic global economy, such as net zero, climate risk, biodiversity and emerging technologies, the gap between concern and action should be a topic of discussion.

The UN’s Principles for Responsible Investing (PRI) 2021–24 Strategy also makes it clear that topics including climate and human rights will become ever more important for investors, especially in the context of the post-pandemic recovery.

private equity graph taking action on ESG issues

Level of concern versus taking action on the 12 largest gaps, Belgian PE firms

Globally speaking, we observe that the gap between concern and taking action is on average greater in Belgium than among global respondents.

Climate risk

In line with the global score, climate risk is an area of major concern in Belgium as respondents are slower to take action. Compared to global respondents, Belgian PE firms are still at an early stage and consider climate risk at a due diligence stage and during the holding period. However, Belgian PE firms lag behind global respondents in terms of developing a clear strategy and approach, enabling them to take clear actions and identify risks as well as opportunities. The main obstacle is the complexity related to assessing climate risks and opportunities at a portfolio level and understanding the financial and business impact thereof.

private equity ESG action taken in belgium

Integration of climate risk, Belgian PE firms benchmarked against global respondents 


How to act on climate risk:
  • Ensure proper governance and oversight of the topic

  • Develop a common understanding of climate risks (physical and transitional)

  • Identify the hotspots (e.g. heatmap, quantitative/qualitative assessment)

  • Take action (e.g. engage with portfolio companies)

Diversity and inclusion

The past five years have seen new resolve on the part of business to improve diversity and inclusion within the workplace, particularly in terms of gender equality. Indeed, 86% of Belgian survey respondents (vs. 77% globally) who have set diversity targets say that diversity is a core value and integral to their culture. A majority already believe that diverse teams generate business benefits - notably in the field of innovation. In a globalised workforce in which companies compete for the talent of a new generation that views diversity as the norm, not the exception, improving diversity and inclusion throughout the sector is becoming a higher priority.

private equity ESG graph with new goals for diversity and inclusion in belgium vs global

New goals for diversity and inclusion, Belgian PE firms benchmarked against global respondents


The prevention of bribery and corruption and business ethics have long been a top governance concern for business. This is confirmed by the fact that they are identified as issues of concern for most Belgian PE firms, and for which there is the smallest gap versus action taken (see figure below). This shows that Belgian PE firms feel more comfortable and equipped to take on these issues by themselves or together with the legal counsel or compliance office.

The connection to compliance with ESG regulation and governance of ESG risks and opportunities is obvious. However, as PE firms address business ethics, corporate values and culture, they will increasingly do so through the lens of responsible investing or ESG strategies. Their outlook and approach will also be shaped by the diversity and innovative talent of their workforce. Ultimately, the governance of both firms and portfolio companies will determine whether the value creation strategies that are being shaped to meet the challenges of our changing world will be sustainable.

private equity ESG graph level of action taken in the top 4 ESG issues in belgium

Level of concern and action taken in the top 4 ESG issues in Belgium that display the smallest behavioural gaps


More mature markets like the UK or France have developed sector wide initiatives promoting diversity and inclusion across PE:
  • In the UK, for example, more than 80 firms have supported the Level 20 nonprofit initiative to improve diversity and inclusion across PE 

  • Almost all PE firms with a French presence have signed up to France Invest’s diversity charter promoting gender equality. 

Next steps

Set a strategy, both as a company and as an investor

ESG issues will reshape the global economy in the coming years and affect the investment success of PE and the entire financial services sector. Furthermore, these issues are interconnected. So it’s crucial for PE firms to incorporate responsible investing and ESG into their general business strategy and no longer consider it as a side issue or specialist offering. Some ESG issues - such as climate risk, net zero, diversity and emerging technologies - will have an overarching influence on firms and their investment portfolios. Other issues might be more specific to individual companies, sectors or geographic locations. Understanding both the big picture and specific portfolio ESG risks and opportunities will help shape a strategy that will deliver sustainable value creation.

Set a clear road map and targets for sustainable value creation

PE firms should approach responsible investing and ESG the same way they would other strategic issues with direct impact on their investment returns. At the portfolio level, PE firms should engage with their portfolio companies’ management teams to truly integrate ESG into their transformation and value creation plans.

Build a team equipped to face the challenge

When assessing new investment opportunities, PE firms should not look at the ESG risks only during due diligence, but should start thinking about the value creation opportunities early on and bake those into the value creation plan. They need to consider how ESG should be handled in commercial, financial and tax due diligence. Fundamentally, leaders should ascertain whether there’s an opportunity to align the business with the sustainable transition that could form part of the investment thesis and truly unlock sustainable value creation. If ignored, sustainability issues can erode value, hinder growth and block access to finance. Conversely, if addressed properly, they can drive value creation across the spectrum. 

Paradigm shifts require a rethink of accepted ways of doing things, to ensure resilience. An understanding of ESG issues will be a fundamental necessity for successful private equity investors. Operational training is essential for investment teams if they are to prepare quickly and truly comprehend the topic.

Firms also need to recruit the right talent to deliver sustainable value creation. That will involve hiring people with sustainable business expertise and, in general, hiring more diverse teams in terms of gender, ethnicity and age, as well as socioeconomic background and training. The good news is that the firms that demonstrate a commitment to ESG will likely be best placed to attract and retain that talent.

Contact us

Philippe Estas

Philippe Estas

Partner, Deals - Transactions & Private Equity Lead, PwC Belgium

Tel: +32 477 27 07 50

Florian Jacques

Florian Jacques

Senior Manager, PwC Belgium

Tel: +32 491 31 03 82

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