08 Jul 2022

Key takeaways from the BVCA ESG half day conference

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Last week, we held our first half day dedicated ESG Conference in London on 29 June which explored the importance of ESG, Responsible Investment and Impact Investing for the PE and VC industry. As part of the discussion, our panellists discussed the importance of companies building an ESG framework as sustainability and climate issues continue to become deeply embedded in global political discourse. Read some more of the high-level learnings below:

  • The Climate emergency is ever more pressing, and reconciling E, S and G, and having a socially just energy transition is a huge challenge which needs to be addressed.

  • ESG expectations of businesses will only increase – it is a social imperative driven by all parts of society – politicians, regulators, customers, employees and ‘the younger generations’ who demand that companies show their credentials in this space.

  • ESG will be a non-negotiable part of doing business in the year to come.

  • Building an effective ESG framework and roadmap can give a company a competitive advantage by being recognised as a purpose-led organisation. This will support the task of attracting talent, especially the younger generation.

  • Start the ESG roadmap now while recognising that the business might not be net zero by the end of planned holding period. However, this commitment can put the business on the right track and being able to demonstrate improvement increases the likelihood of a higher exit multiple.

Impact and ESG - what are the differences? And how to build an effective ESG framework
  • ESG is a tool / framework to build better businesses. It is both a hygiene factor and a way to add value to an investment.

  • Impact is the outcomes achieved. Measuring and monitoring improvements is essential to demonstrate the impact of the programme. Panellists suggested that companies review metrics and key data at least annually and if a metric is not relevant anymore because the business has changed, to retire it.

  • Leading funds in this space are looking for ways to measure impact returns in the same way as financial returns.

  • Invest time to educate yourself as there is a wealth of material out there to help you. You do not need to start from scratch. Companies are encouraged to just make a start. Further details can be found on the BVCA website.

  • Educate others as it is important to get the buy-in and the win hearts and minds of your stakeholders (investment committee, management teams etc) so that they actively support the ESG framework adopted and do not consider is merely a compliance exercise. Demonstrate the journey and the value it creates. Consider the needs of your stakeholders in terms of what reporting is required, why and how best to support this.

  • Ensure accountability and responsibility for implementing and monitoring the framework is clear as it may take a long time to deliver the roadmap, and the same person may not be responsible for the journey and the delivery milestones.

  • ESG is everyone’s responsibility, not only that of the ESG Director.

Climate strategy
  • There are several aspects to a climate strategy but reducing emissions to combat global heating is the most pressing. Carbon emission reduction and net zero plans are essential.

  • It is important to understand and then measure the baseline for businesses – proper ESG due diligence is essential – to avoid risks and to identify opportunities.

  • Private equity and venture capital backed businesses are an essential part of the climate / energy transition – they have the space to make the changes needed.

  • It is important to demonstrate strong ‘E’ ESG credentials to help with future fundraising, to attract management teams who have the experience and want to work with you, for attracting talent, and for being a sustainable and ethical business for the future of business and society.

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