In today’s fast-evolving private markets, sustainability is no longer simply a regulatory checkbox or a reputational add-on. It is a powerful driver of financial value. Research and investor insights show that companies integrating sustainability into their core strategies can unlock approximately 6% revenue growth and achieve a 6-7% uplift in exit multiples.
This compelling business case emerges from a detailed and collaborative study by PRI (Principles for Responsible Investments), Bain & Company, and NYU Stern Centre for Sustainable Business. The study involving over 400 investors globally, 27 in-depth interviews, and 85 survey respondents across regions and sectors.
SVC Framework
The report introduces the Sustainability Value Creation (SVC) Framework. It emphasizes value-driving sustainability activities embedded at both the investment firm and portfolio company (PortCo) levels, supported by organizational enablers. These activities span the full investment lifecycle—from deal screening and due diligence through early ownership and portfolio management, culminating in exit strategies.
Key to success is embedding sustainability into existing business priorities and ensuring it fosters measurable financial outcomes through initiatives tailored to material sustainability topics.
How Sustainability Pays Off Financially
Sustainability efforts boost revenue and also enhances customer value. Consumers are willing to pay more for sustainable products. For example, some pay up to a 28% premium in eco-friendly packaged goods.
Reduces costs through operational efficiencies, energy savings, circular design, and waste reduction—often yielding about 6% cost optimization at exit.
Mitigate risks such as regulatory fines, reputational damage, and supply chain vulnerabilities. In turn contributing substantially to risk resilience and higher valuations.
Robust sustainability programs optimize exit multiples. They create compelling impact stories. This attracts a wider base of buyers and investors, including those focused on impact.
Companies with strong sustainability efforts benefit in several ways. They see increased employee engagement. This can lead to 67% faster revenue growth and higher profits. Sustainability also drives innovation. It helps companies adapt to new regulations and market demands, essentially future-proofing them.
Data, Buy-in, and Integration
Despite the growing evidence, many investors and portfolio companies struggle with translating sustainability efforts into measurable financial results.
Key challenges include:
- Limited availability of high-quality sustainability and financial data metrics to quantify impact.
- Insufficient engagement from deal and operations teams and lack of accountability structures.
- Lack of standardized processes, frameworks, and incentive alignment to embed sustainability systematically.
- Potential solutions focuses on integrated governance. This involves setting clear targets and KPIs directly linked to financial results. Education helps build necessary capabilities. Fostering cross-team collaboration is also key. The goal is to embed sustainability as a core investment driver, not just siloed initiatives.
- Investment Firm -Level Strategies
Firms should align their sustainability strategies with investment ambitions and sector focus. This means integrating sustainability into fundraising dialogues, LP engagement, due diligence, and portfolio management. Leaders like CVC and Warburg Pincus offer examples. They use tailored approaches, engage early post-deal, and provide programmatic support for portfolio companies to implement sustainability roadmaps.
For portfolio companies, success hinges on identifying material sustainability topics relevant to their sector and context, focusing on initiatives that can maximize financial impact. Core topics include:
Environmental: energy consumption and GHG emissions reduction, circularity, waste reduction, water stewardship.
Social: labour practices (health and safety, employee engagement), workforce diversity and inclusion
Governance: responsible business practices, transparency, risk management, digital rights.
Regional Nuances in Value Drivers
While sustainability is globally recognized as a financial value driver, regional emphasis varies:
- Europe prioritizes revenue growth through customer-centric sustainability initiatives and innovation.
- North America focuses on risk mitigation and cost reduction, with increasing efforts to link initiatives to financial value.
- Asia-Pacific emphasizes social initiatives (employee engagement, health and safety) alongside product sustainability.
- Africa and Latin America highlight cost efficiency and community engagement as key drivers, reflecting local priorities.
From Leadership to Data and Talent
- Sustainability’s full financial potential is only realized when firms and portfolio companies implement enabling structures:
- Executive sponsorship, clear accountability, and embedding sustainability as a value driver across teams.
- Integrated workflows, sustainability committees, and decision-making protocols aligned with financial goals.
- Upskilling staff, hiring experts, and fostering cross-functional collaboration to implement initiatives effectively.
- Centralized sustainability data systems, KPI tracking, and regular reporting to establish ROI and build investor confidence.
- At portfolio companies, assigning sustainability ownership, allocating budget, leveraging digital tools, and tying management incentives to sustainability milestones are critical steps.
From Framework to Execution
This report is Phase 1 of a larger PRI program. Its goal is to equip investors with actionable guidance on sustainability-linked value creation. Upcoming phases will offer targeted industry playbooks. They’ll also provide methodologies for measuring financial impact. This includes detailed case studies and tools for quantitative assessments.
The collective effort to integrate sustainability deeply promises not only improved financial performance but also resilient, responsible businesses able to thrive in a dynamic marketplace.
Sustainability is a proven value lever in private markets, delivering roughly 6% revenue growth, cost optimization, risk mitigation, and improved exit valuations. Unlocking this requires strategic integration, clear KPIs, and supportive structures. Investors increasingly see sustainability as a core competitive advantage and financial driver, a trend set to accelerate globally.
