A 73% majority of private equity fund investors have said moves pushing back against Diversity, Equity and Inclusion (DEI) in the US could have a meaningful impact in Europe, according to Brackendale’s sixth private equity sentiment report: DEI: Progress, Policy or Pushback.
The report explores the perspectives of European LPs on DEI and its long-term viability in European private markets, amidst the backdrop of a shifting macroeconomic and politically charged environment. It canvasses opinions from a network of LPs, including insurance firms, pension companies, family offices and fund-of-funds across Europe.
Also read: Morningstar Sustainalytics calls on investors to contextualise DEI rollbacks as concerns mount
Despite rising tensions surrounding corporate DEI rollbacks in the US, 78% of European investors agree that the diversity of thought implicit in balanced and diverse teams is linked to financial outperformance.
However, LPs are divided on the overall importance of private equity funds considering DEI factors within their investment teams and portfolio companies, giving an average score of 5 out of 10. Yet, 71% of LPs surveyed rate DEI’s importance between 6 and 10, evidencing the broad divergence of opinion in importance by investors.
For those who answered positively, respondents claimed DEI is effective in reducing groupthink, leading to a broader range of perspectives in investment decision-making. Limited partnerships (LPs) holding a dimmer view of DEI said it has lost importance post-Trump administration and prohibits meritocracy.
Fay Margo, CEO, Brackendale Consulting, commented: “Although certain LPs are indeed being influenced by political pushback against DEI, there is a sufficient amount of LPs who continue to recognise and uphold the financial and ethical benefits of embracing diversity, both within the private equity investment teams LPs choose to partner with and the portfolio companies in which they invest.
“GPs would do well to stay committed to existing policies that champion DEI, recognising the demonstrable enhancements it brings to team culture, networks and overall value creation. It would be a pity to undo the progress that was starting to be made in private equity.”
