Welcome to Behind the Buyouts, The Deal’s podcast in which we sit down with leading private markets investors and drill down into their buyout, growth equity and venture capital deals.
For this edition, Brian Gildea, head of investments at Hamilton Lane Inc., talks about how U.S. private equity firms and investors have pivoted to focus on the “S” of environmental, social and governance, or ESG-based, investing.
The Bala Cynwyd, Pa.-based firm, which invests in alternatives and advises institutional investors on their PE allocations, has been tracking a number of funds focused on promoting positive social impacts. But since many of these funds have been launched within the past four years, it’s too early to determine if their cause-based investing also delivers solid investment returns.
“Overall, ESG is playing a larger role both in society and the investment community,” Gildea said. “It’s because people are interested in understanding how the organizations they interact with are behaving as good global citizens.”
Gildea said it’s important for private market investors to seek out information about ESG practices in their private equity funds and portfolio companies and then vote with their dollars.
The good news on this front is that private markets offer more choices than ever, with roughly 1,000 new funds coming out per year.
On the co-investment front, Hamilton Lane has been more cautious on whether it’s always the best avenue for a limited partner to pledge capital outside the fund structure for a specific M&A deal.
While it has been a way for LPs to avoid paying the fees associated with a given PE fund, it also demands a slightly different skill set.