Ellen de Kreij, Apax Partners’ ESG practice lead adviser, reflects on the past year and looks forward to 2023.
Looking back at 2022, what pivotal events, moments or developments in terms of sustainability in private markets stood out to you?
One of the standout developments for 2022 has been the degree of collaboration within the private markets ESG community to tackle major issues such as climate change in a joined up collaborative manner. This willingness to closely collaborate with each other is something the private equity community can be proud of and makes the sector unique relative to others. The growth in membership of the initiative Climat International and the breadth of very insightful guidance published through this voluntary initiative is remarkable. Similarly, the Sustainable Markets Initiative PE taskforce is a great example of this collaboration at the most senior levels of private markets firms.
Has the private funds industry made progress on climate in the last year? Where are the bright spots? Where has it disappointed?
The private funds industry has made tremendous progress on climate in 2022. At the start of the year, there was not yet widespread alignment on how to operationalise a climate strategy in private markets. Over the course of the past 12 months, through multiple initiatives, there is now a clearly outlined pathway which firms can adapt to their own specific context. Today there still is a clear distinction between firms that have fully engaged on the climate agenda and have implemented detailed programmes for portfolio companies to measure emissions from the bottom up, and firms that are lagging and not taking much action. But given all the groundwork done in 2022, this group should be able to catch up quickly.
Looking ahead to 2023, what is your firm’s next priority in terms of the climate? What would you like to have completed over the next 12 months?
Companies in the two most recent Apax Funds have each conducted a detailed scope 1, 2 and 3 baseline carbon measurement in 2022. For many companies it was the first time emissions data was collected in such a detailed manner. Based on this, data companies have the toolkit to identify their major sources of carbon emissions and use these insights to develop reduction plans. For 2023, the priority will be to ensure that companies continue their journey, build climate considerations into long term strategic planning, implement reduction initiatives, and set and report on decarbonisation targets where relevant.
Aside from climate, which other areas of sustainability will be prominent on your agenda and why?
Portfolio ESG data has been a core component of the Apax ESG programme for over a decade. Measured data gets managed and can also provide transparency for stakeholders. Apax collects over 150 data points from portfolio companies across the E, S and G spectrum. In 2022, Apax made a significant investment into making all relevant ESG data available on the Apax investor portal and enabling investors to download ESG data by portfolio company. As the external appetite for detailed ESG data has increased, we will be focusing on how we can enhance our data portal to make it even more decision useful to our stakeholders. It will also simplify the many regulatory reporting challenges which the sector will be facing in the next 12 months.
How are more emerging topics like nature/biodiversity occupying your time and resources?
Nature and biodiversity are intertwined with climate engagement in so many ways, and it is very positive that biodiversity is now moving up the agenda as a topic which private markets investors should be focused on. A large proportion of capital invested by Apax Funds is invested in technology businesses, and for these companies biodiversity is not an issue which they currently can actively impact through their operations. It will be a topic that will be signposted to all portfolio companies, and we will start working with those companies where engagement on biodiversity can substantially move the needle.