Irony is dead: Ethical Capital buys Pornhub

A private equity firm that prides itself on ‘ethics-based investing’ has bought the owner of pornography website Pornhub.

Ethical Capital Partners (ECP) bought Mindgeek, the Luxembourg-based owner of Pornhub and a number of other adult websites, for an undisclosed sum after the group became mired in controversy.

MindGeek, one of the world’s largest porn companies, is being sued over allegations that sexually explicit videos involving children were found on its websites.

The company’s top management left last year amid a string of criticism and it was partially cut off from the Visa and Mastercard payment networks in 2020, which almost led to its collapse. The firm, however, denies any wrongdoing.

ECP’s purchase of Pornhub may have surprised many – given that, on its website, the private equity group says it seeks out investments in areas that require ‘principled ethical leadership’.

In focus: Ethical Capital Partners bought Mindgeek, the owner of Pornhub and a number of other adult websites, for an undisclosed sum

Despite saying it values ‘transparency and accountability’, ECP refused to disclose which of MindGeek’s remaining executives would continue to run the company.

Solomon Friedman, a lawyer and co-founder of ECP, told the Financial Times the company would not identify the executives due to the ‘unfortunate stigma’ attached to the adult entertainment industry.

He added that, in his view, much of the criticism of MindGeek and the resultant lawsuits was due to misunderstandings around how the company was safeguarding content – an issue exacerbated by the secrecy of its previous owners, who included Austrian businessman Bernd Bergmair, a former employee of Goldman Sachs.

ECP’s purchase of MindGeek is likely to fuel scepticism around investment funds classifying themselves as compliant with environmental, social and governance (ESG) criteria. ESG is a set of standards used to measure a business’s impact on society and the environment as well as how transparent and accountable it is.

But the framework has been criticised in recent years as some firms have been caught touting themselves as ESG-compliant while investing in industries that run against the ethos.

ESG compliance has been particularly controversial in areas around climate change. A report last October from data platform ESG Book highlighted 95 climate funds invested in fossil fuel companies, including Shell and US giant ExxonMobil.

Analysis by online wealth manager SCM Direct showed that the SPDR US High Yield Corporate ESG fund, managed by US investment firm State Street, held investments in gambling, tobacco and adult entertainment companies – despite claiming it aimed to exclude firms based on their ‘involvement in certain controversial business activities’.

The £6.8billion Royal London UK Core Equity Tilt fund claimed to incorporate ‘responsible investment and environmental, social and governance insights’ into its strategy while top holdings included Shell, BP and British American Tobacco.

This post first appeared on Dailymail.co.uk