General Trends Across Regions:

Several key trends are shaping private equity globally. Integrating ESG into core business strategies is becoming a norm across regions, driving demand for professionals who can think holistically about ESG’s impact throughout the investment process. 

The emphasis on measurable impact and value creation is increasing. Firms seek individuals who can implement ESG strategies and quantify their financial benefits, such as improved portfolio performance. Regulatory compliance and risk management are becoming more critical, with firms needing professionals to navigate the growing complexity of ESG regulations across different jurisdictions.  

Data management and analytics are also in high demand as firms seek to enhance their ESG reporting capabilities. Climate change and the energy transition are central to many private equity firms’ strategies, creating opportunities for professionals with expertise in decarbonisation and clean energy investments. 

UK  and Europe: 

The private equity landscape in the UK and Europe has been transitioning, particularly with the demands of ESG factors and regulatory shifts. Although the market has been relatively quiet, especially during summer, increased activity is expected through October/ November. This anticipated rise is likely due to firms preparing for year-end evaluations and setting strategies for the coming year. 

One of the most notable trends within UK and European private equity is the deepening integration of ESG into core business strategies. ESG is increasingly viewed as a fundamental component of risk management and value creation rather than just a compliance exercise, a shift that's particularly evident in the Nordic countries, where both portfolio fund and company strategies are aligned with ESG considerations.  

Regulations, such as the SFDR and the forthcoming CSRD, drive demand for professionals capable of navigating these complex requirements and implementing comprehensive ESG frameworks. 

In terms of recruitment, there’s growing interest in hiring "ESG 2.0" professionals who understand ESG principles and have hands-on experience in private equity deal-making. Firms continue to seek candidates who can bridge the gap between ESG theory and practical implementation in a private equity context. 

The focus on value creation through ESG continues. UK and European private equity firms are increasingly looking to leverage ESG initiatives to enhance the performance of their portfolio companies.  

ESG considerations are also playing a more significant role in due diligence. Private equity firms now integrate ESG assessments into their pre-acquisition evaluations, viewing strong ESG performance as a marker of well-managed companies with lower risk profiles. This has driven demand for professionals skilled in ESG due diligence who can identify risks and opportunities. 

A shift in the roles created within private equity firms is evident. While senior ESG professionals remain in demand, there's growing interest in junior roles focused on data management, reporting, and compliance due to the increasing complexity of ESG-related reporting requirements. Skills in quantitative analysis and interpreting ESG data are increasingly valued as firms aim to quantify the impact of ESG initiatives on financial performance. 

The public market’s ESG space has been notably quiet in the UK and Europe, prompting some professionals to transition to private markets. While this shift offers opportunities, it also presents challenges, as private equity firms often prefer candidates with specific private market experience. 

United States: 

In the United States, the private equity landscape presents a mixed picture regarding ESG and sustainability. While there has continued political backlash against ESG, particularly in some states, many firms implement sustainable practices, albeit more discreetly and emphasising financial materiality. 

US private equity firms increasingly seek professionals with ESG knowledge and practical deal experience, particularly for senior roles. This reflects a broader trend of integrating ESG into the entire investment process, from deal sourcing to portfolio management. However, a challenge in the US market is integrating professionals with academic backgrounds into private equity. Candidates from academia often focus more on the philanthropic aspects of ESG rather than its financial return potential, which has led firms to prefer those who can balance sustainability with the profit-driven nature of private equity.  

The regulatory environment in the US is evolving. The SEC’s decision to disband its ESG Task Force suggests that ESG evaluation may become more embedded in the exam process rather than treated as a separate area. Despite political resistance, large firms like KKR and Blackstone remain committed to ESG principles, though mid-market firms remain more sceptical. 

US firms are also increasingly seeking professionals who can demonstrate the tangible value of ESG initiatives. This includes developing and implementing value-creation plans that can be measured and linked to financial performance and communicating these benefits to investors and stakeholders. 

Climate-related risks and opportunities are gaining focus in the US private equity market. Professionals who can assess the impact of climate change on portfolio companies and identify opportunities in clean energy and decarbonisation strategies are in high demand. Additionally, ESG data management and analytics are becoming critical as firms strive to measure and report ESG performance more effectively. The integration of ESG into alternative investment strategies, such as private credit and infrastructure, is another emerging trend, offering new opportunities for professionals who can adapt ESG to different asset classes. 

Middle East: 

The Middle East's private equity landscape presents a unique and evolving approach to ESG. While historically less focused on ESG than other regions, global investors and changing local priorities drive greater activity and interest in this area. 

The ESG recruitment market in the Middle East remains buoyant, with firms increasingly recognising the need for sustainable practices to attract global capital and manage long-term risks. This drives the recruitment of professionals who bring ESG expertise and strategic thinking. 

One key trend is aligning ESG practices with local development goals and cultural values. ESG principles are increasingly seen as a way to support economic diversification, particularly in renewable energy, sustainable infrastructure, and technological innovation across Gulf nations. Firms are seeking professionals who can bridge global ESG standards with local market realities. 

There is a growing demand for professionals who can help Middle Eastern firms navigate the ESG expectations of international investors. As sovereign wealth funds and private equity firms from the region expand globally, they recognise the importance of aligning with international ESG standards to facilitate cross-border partnerships. Additionally, there is increased interest in sustainable finance and impact investing in the Middle East, with demand for professionals experienced in green bonds, sustainability-linked loans, and social impact measurement. 

Climate change and environmental sustainability are increasingly significant for Middle Eastern private equity. The region’s reliance on fossil fuels and vulnerability to climate change means a growing need for professionals who can assist firms in navigating the energy transition. Furthermore, governance and transparency are becoming more important as the region seeks to attract international investment, creating demand for professionals skilled in governance structures and disclosure practices. 

Quarter 4 Outlook: Challenges and Opportunities

While ESG integration presents significant opportunities for private equity, it also brings challenges. There is a need for more professionals with deep ESG knowledge and practical private equity experience, making it difficult for firms to fill senior ESG roles. The lack of standardised ESG data and reporting frameworks complicates assessing and comparing ESG performance across investments. 

Consultancies play a significant role in supporting private equity firms' ESG integration efforts. From ESG Strategy Development, Due Diligence Support, Reporting and Disclosure Assistance, Training and Capacity Building to Technology Solutions 

The demand for consultancy services has been particularly strong among mid-sized and smaller private equity firms that may lack the internal resources to fully develop their ESG capabilities.