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ESG integration is a key consideration at RAISE Impact

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RAISE Impact is an impact investment strategy dedicated to investing in growth companies that are both profitable and committed to building a more sustainable future. The strategy’s Co-head, Aglaé Touchard Le Drian, highlights how ESG considerations are integrated into every stage of the investment cycle and act as an effective lever for value creation…

Are clients growing more demanding about returns from ESG integration?

Client expectations regarding returns from ESG integration are indeed on the rise. It’s essential to highlight that at RAISE Impact, ESG integration is not at the expense of financial returns, on the contrary, we strongly believe that it is a driver of value creation. This dual focus on ESG and financial performance resonates strongly with both Limited Partners (LPs) and companies.

LPs are becoming increasingly informed and demanding when it comes to sustainable portfolio performance. They closely scrutinise the long-term sustainability and impact of their investments. At RAISE Impact, we seek to be exemplary in our approach to manage sustainability risks (ESG), while financing new business models designed to address the pressing environmental and social challenges of today and tomorrow. This distinctive approach aligns with clients’ growing expectations for meaningful returns from ESG integration.

If yes, how has your firm adapted to meet these demands?

At RAISE Impact, we strongly believe in the importance of internalising expertise to meet the demands of entrepreneurs and LPs. Since the inception of our strategy, we have allocated two dedicated professionals to these critical ESG and impact matters, serving our 16 portfolio companies. Impact is completely embedded throughout our investment process.

This commitment allows us to pursue ambitious objectives, for example, driving a transition towards carbon neutrality. We offer individualised support to our portfolio companies, providing “tailor-made” solutions that address their unique ESG challenges and opportunities. To do so, we designed a comprehensive toolkit devised to answer portfolio companies’ vast array of ESG needs, from carbon footprint to workforce diversity.

One of our primary strategies to drive returns from sustainability integration involves integrating Impact criteria into the compensation structures of our executives and team members. This approach aligns incentives with our commitment to ESG and reinforces our dedication to achieving both financial and impact-driven goals.

How are you and your clients integrating ESG considerations into your firm’s decision-making processes?

We integrate ESG considerations into our decision-making processes at every stage of our investment cycle, from screening opportunities to the exit strategy, with ongoing operational support throughout detention. A pivotal aspect of our approach is the involvement of an impact committee composed of expert professionals.
This committee plays a crucial role in assessing and guiding the incorporation of impact throughout our investment process, ensuring that ESG factors are thoroughly and systematically integrated into our decision-making, and that we consistently align our investments with our impact objectives.

In what ways is ESG an effective lever for value creation?

ESG considerations have moved beyond being mere ethical concerns to becoming powerful drivers of value creation. By enhancing sustainable performance, several value creation levers can be actioned:

  • Employee engagement: Companies committed to sustainable development foster a more engaged workforce, which, in turn, reduces turnover and the associated recruitment and training costs.
  • Operational excellence: An ESG-focused approach can lead to operational improvements across various dimensions. It can reduce raw materials’ consumption, enhance energy efficiency, and lower accident rates, thus reducing operational costs.
  • Enhanced stakeholder relationships: through ESG integration, companies adopt a more stakeholder-centred approach, thus improving relationships with customers, suppliers and investors. Sustainability-conscious consumers are increasingly seeking products and services from responsible companies, which can boost sales and brand loyalty. Moreover, suppliers prefer to collaborate with businesses that uphold ethical standards, fostering long-term partnerships and potentially reducing procurement costs.
  • Anticipation of compliance costs: By proactively addressing ESG issues, companies can mitigate potential compliance-related expenses. This includes staying ahead of evolving regulations and avoiding penalties or fines.

 

As an impact investor, we deliver substantial returns on investment – our first exit delivered a remarkable fivefold return on the initial investment – while simultaneously contributing to a healthy planet, as well as fair, inclusive and resilient societies.

What ESG-specific opportunities are emerging in the private equity industry in the near future?

We see impact investing as a key opportunity for the private equity industry in the near future. As more investors, including institutional investors and high-net-worth individuals, seek to generate positive social and environmental outcomes alongside financial returns, impact investing is increasingly seen as a market with substantial growth potential.

Impact investing allows our industry to support innovative solutions to complex global problems. Investing in businesses that are working on decarbonisation technologies, nature-based solutions, or socially inclusive projects can lead to financial returns while contributing to solutions for global challenges.

Finally, by putting a clear emphasis on investors’ contribution, impact investing encourages long-term value creation through financial and operational support. By working in partnership with companies, investors can drive companies’ international expansion, digital transformation and improve their sustainable performance, thus increasing the attractiveness of their portfolio companies to a broader range of acquirers.

 


 

Aglaé Touchard Le Drian, Co-head, RAISE Impact – Aglaé is co-Heading RAISE Impact, one of the largest European impact fund targeting environmental and social businesses. Before joining RAISE Impact as a Partner, Aglaé Touchard Le Drian was exposed to impact investing in developed and developing markets throughout her career, at the EIB and EIF where she was in charge of the management of the GEEREF fund (Global Energy Efficiency and Renewable Energy Fund) and the SIA fund (Social Impact Accelerator), as well as at Proparco (French Development Agency Group), where she was in charge of the FISEA fund (Investment and Support Fund for Businesses in Africa). Aglaé also worked in strategic consulting (with LEK Consulting) and investment banking (with Rothschild & Cie). She holds qualifications from the Institut d’études politiques (Sciences Po Paris), the Ecole supérieure de commerce (Paris School of Management) and the Université de Paris IX-Dauphine. She lectures a class on Impact Investing at Sciences Po Paris.

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