Sustainable private equity – investment in environmentally responsible businesses – is an emerging niche of the private equity industry that encompasses a wide range of investment options, including investments with risk-adjusted returns competitive with traditional private equity. This background paper discusses the basics of traditional private equity, different forms of sustainable private equity, and standard criteria useful for classifying both traditional and sustainable investment approaches.

Private equity investment offers unique advantages to socially responsible investors, increasing not only the number and variety of companies in which to invest, but also the variety of ways in which capital can be used to encourage, support, and develop socially responsible businesses.