Global Infrastructure PE Fund Performance: Does ESG Matter?

Using key performance indicator (KPI) scores from data and insights provider Preqin, we assess the performance of global infrastructure private equity (PE) funds that have achieved higher environmental, social, and governance (ESG) scores. Using ordinary least squares (OLS) regression analysis, we find that funds with higher ESG scores achieve better performance over the 1994–2022 period. Our findings are robust when the net internal rate of return (net IRR) and total value over paid-in (TVPI) are used as proxies for infrastructure PE fund performance. Furthermore, industry diversification and fund size attenuate the outperformance of high-ESG funds. With subcomponents of country-level ESG ratings as the instrumental variables, the results are robust. Our results contribute to the debate on the performance of socially responsible investing funds and provide further validation for PE fund managers to incorporate ESG considerations into the investment process.