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David Rubenstein: You're going to get a higher rate of return with investments that are doing some "good things for the world"

Private equity billionaire David Rubenstein explains how private equity has changed since he entered the business, explaining the importance of Environmental, Social, and Corporate Governance (ESG) investing.

Video Transcript

DAVID RUBENSTEIN: In those days, I would say, most people in the private equity were-- let me speak to that-- were mostly interested in the highest rate of return they could legally get from people like us. And so they were not as worried about ESG factors, not as worried about whether you're shipping jobs off shore or things like that. It was basically, what kind of return can you get me? How long will it take you to get it? And everything you're doing is legal, right?

Now, people say, I want to make sure I have an investment that I can be proud of. I have to go to my board and say, here's the ESG factors. I do believe many investors say that if you comply with ESG factors, you're likely to get a higher rate of return. For some period of time, people thought that ESG would mean you're going to get a lower rate of return.

Increasingly, the zeitgeist of the era is that if you comply well with ESG factors-- good corporate governance, good concern about the environment, good social practices-- you are going to get a higher rate of return. And that's particularly true in diversity, as well. Increasingly, investors say, I want to give money to people that have diverse people in their organizations, because those people are going to reflect society much better than just old, white males. And I think they're right.

So the investment based-- investor base has changed. And it's also changed-- it's not just a US investor base, but people all over the world are increasingly saying, I want to observe these kind of factors in my investments. And I'm more interested in doing something that's good for the world than just getting the extra 1 or 2 basis points I might get from an investment that's not doing something good for the world.