There’s little debate that private equity is uniquely placed to enhance the environmental, social and governance viability of a business, but the debate over whether ESG provides value to PE investors still burns. While some data does suggest that ESG-minded businesses fair better over time, industry-specific data is generally lacking, and there’s no doubt that instilling a rigorous ESG framework at both the portfolio and firm levels requires significant investment up front.

A poll taken during a panel on PE’s priorities for 2020 showed that relatively few LPs consider ESG priorities relevant to their investment decisions; a fact that of course translates to their GPs, who serve them.

“[The poll] reflects the fact that we are living in a world where a lot of folks are still worrying about ESG and its value to the bottom line of our portfolios,” said one CFO of a mid-market firm. “We still have a long way to go on learning the value of it.”

Across panels and one-on-one discussions at the CFOs & CFOs Forum in New York, industry professionals expressed various opinions on the topic of ESG in PE, but two themes stood out.

First: at least in the US, returns currently and in the foreseeable future take priority over environmental concerns, if not social. But that good governance is, of itself, a pillar of PE’s value proposition as an industry.

“Maybe for us [the PE industry], it should be GSE,” one executive at a large mid-market firm said to Private Funds CFO. The CFO speaking at the panel echoed that thought, saying that getting her firm to come around to the idea of ESG was a simple matter of rearranging letters.

“I got my partners engaged and interested in ESG by focusing on the ‘G’ part of it and the value of improving the governance within our firm and improving the governance within our portfolio companies,” the executive said. “And then from there we moved in the other directions.”

Takes on the whole ESG subject vary widely, sometimes even within the same firm. For some, it is a matter of what LPs want; for others, it’s simply a moral priority. For yet others, it is a potentially costly annoyance.

Speaking to Private Funds CFO during the networking lunch on Thursday, John Stewart, partner at Dallas-based MiddleGround Capital, maintained an outlier position, saying that his firm pursues ESG investments (primarily in industrials and B2B companies) not because it is necessarily profitable, but because “it is the right thing to do.” The firm closed its first fund above a hard cap of $459.5 million in September.

But another PE professional told Private Funds CFO that his firm had just come out with an ESG policy, which was, in effect, “that we don’t have an ESG policy,” adding that returns are simply the priority.

Even implementation at the portfolio company level evokes debate, from whether and how to impose standards and requirements, to whether the approach should be principles or rules-based.

So how will we know when ESG in private equity has worked?

“When we see it in a CIM,” deadpanned one CFO.