Publication Type
Working Paper
Version
publishedVersion
Publication Date
11-2025
Abstract
We show how Limited Partners' (LPs) environmental and social (E&S) concerns transmit to private equity (PE) rms through capital supply. E&S incidents in portfolio companies reduce PE fundraising, as E&S-concerned relationship LPs refrain from recommitting and are not easily substituted. Using a legal reform that expands E&S-concerned public pension capital to PE, we causally show that PE rms internalise LPs' E&S concerns, reducing dirty sector portfolio allocation and increasing ESG hiring. Additionally, PE rms with E&S- concerned relationship LPs engage with portfolio companies to manage E&S risks. Limited capital substitutability enables LPs to delegate E&S preferences, shaping PE allocation and engagement.
Keywords
private equity, fundraising, limited partners, relationships, ESG, sustainability
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
Areas of Excellence
Sustainability
First Page
1
Last Page
98
Publisher
Sim Kee Boon Institute for Financial Economics
City or Country
Singapore
Embargo Period
3-4-2026
Citation
DUEVSKI, Teodor; RASTOGI, Chhavi; and YAO, Tianhao.
Can limited partners mitigate negative externalities in private equity?. (2025). 1-98.
Available at: https://ink.library.smu.edu.sg/skbi/63
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.