Maximising ESG impact in private equity: Part Three – The keys to future success

Samuel Gilbert-Ward

By Sam Gilbert-Ward, business analyst, Pollen Street Capital – Looking to the future, post-Covid, the success of ESG impact investing can be secured by championing three key pillars. First, building ESG into the culture of organisations, supporting initiatives with the resource it deserves. Second, establishing best practice. And third, going beyond reporting, focusing on the actual impact and celebrating successes.

Pillar one – Build the culture

As with any change in a business, culture is key. Until ESG is embedded throughout the business it can get stuck as a collection of well-intentioned efforts that struggle to deliver impact. In the second part of this series, we discussed how, as an active asset manager and strategic partner, you can ensure that ESG is a consistent consideration at board level. This in turn encourages senior sponsorship of projects, empowering employees to run with them and make a meaningful difference.

When ESG is integrated into the DNA of a business and aligned with the strategy, then teams are better placed to understand and drive progress towards a core ESG mission.

Part of building ESG into the culture is supporting it with the resource it deserves. ESG requires the correct resourcing to be impactful. This doesn’t have to be a dedicated team – the aim here is to ensure that employees feel supported in taking time to focus on ESG impact areas and seeing it as an important strategic pillar.

Pillar two – Establishing best practice

As with many aspects of asset management, one of the most impactful ways in which we can help a business is through our experience. At Pollen Street Capital we are financial and business services specialists, bringing our accumulated knowledge to each new business.

More often than not businesses are faced with the same set of problems, but businesses supported by active managers don’t have to start at square one. Through knowledge sharing and guidance we accelerate thinking and quickly turning intentions into actions.

It’s important to remember the role that employees can have in shaping the ESG direction. Having employees at all levels championing the ESG agenda supports the values of the business and results in everyone having buy-in to drive projects forward. This is only possible with clear ways of working.

For example, Pollen Street Capital’s ESG committee is made up of both senior sponsors and passionate members of the team, who join the discussion and have a positive impact in setting our ESG and responsible investing strategy. This has led to the creation of our flagship ESG programme through Ten Years’ Time, helping us to connect our ESG impact with the organisation and its incredible people and expertise.

Pillar three – Going beyond reporting

Fundamentally, ESG is about impact. Too often it’s seen as a tick box reporting exercise, a collection of KPIs or a collection of shifting topics that move with consumer trends.

We have to remember that KPIs are the measure but not the goal. Many aspects of ESG are intrinsically hard, and even sometimes impossible, to quantitively measure. For example, the impact that a mentoring program can have on shaping a student’s life years later or trying to quantify the impact of financial inclusion and access to finance for both consumers and SMEs.

Reporting should be used to highlight and celebrate the great work businesses do, while maintaining focus on topics that are important to stakeholders. To achieve this, it is important to minimise the burden of reporting, which can be achieved through structured and easy to understand reporting frameworks. The aim here is to remove the feeling that ESG interactions are constantly about reporting.

By going beyond reporting it allows you to celebrate successes. If progress is to continue in the future, taking the time to congratulate employees and teams for the great work they have already done is vital. There are many tools at our disposal to achieve this:

  • Highlight their great work through your media channels, and coordinate with any partners
  • Take time at the board level to recognise progress that the business has made on ESG impact areas
  • Include regular updates in newsletters to both the wider portfolio and investors
  • One-to-one recognition, through something as simple as a call or email, should not be underestimated

The practical steps set out in this three-part series highlight just how well-positioned private equity firms are to drive positive impact. With access to the most senior people in businesses, you can step back to agree strategy and process, prioritising resources and ensuring the most impact.

Fundamentally there is a need to understand ESG as more than an abstract concept or simply increased reporting. ESG is about the impact that comes from empowering and equipping people and businesses with what they need to make a meaningful difference.

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