Caroline Löfgren, chief sustainability officer at technology-focused private equity firm Hg, reflects on the last 12 months and looks forward to 2023.
Looking back at 2022, were there any pivotal events, moments or developments in terms of sustainability in private markets?
A pivotal event in the last year was reaching over 200 members of the initiative Climate International – a global community of private markets investors who seek to display leadership in improving the industry’s understanding and management of the risks and opportunities associated with climate change – and the launch of some great reports due to various collaborations. To mention a few: the PE GHG accounting standard with ERM, the TCFD guidance for PE firms with KPMG and BVCA and the A case for Net Zero in PE guidance with Indefi.
I would also say the ESG Data Convergence Initiative was a great moment, as it is a starting point to streamline reporting between LPs and GPs and provide benchmarking for PE firms and their portfolio companies.
Finally, I think we can all agree that SFDR has had a big impact on the industry in 2022 helping to provide further transparency to the market of sustainable investments.
Thinking specifically about private markets, do you think the industry has made progress on climate change in the last year? Where are the bright spots? Where has it disappointed?
A key step was last year’s PE guidance from the Science Based Target’s initiative, which was codeveloped with the Net Zero working group of the iCI. Several PE firms have now committed to set SBTs in line with the standard since its launch at the end of 2021.
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?
We have supported our portfolio companies in calculating their carbon footprints for the past two years. In early 2023 we will facilitate yet another footprint exercise, covering scope 1, 2 and 3 emissions using the GHG protocol. Another key focus for us in 2023 is on further enhancing data quality and providing some extra support to portfolio companies in this regard. We will also continue to focus on our commitment to the Science Based Targets initiative and continue to engage with our portfolio companies to help them set targets in line with our ambition.
Aside from climate, which other areas of sustainability will be prominent on your agenda and why?
As we have recently grown our ESG team to four team members we now have more availability to support our portfolio companies in ESG related projects such as setting ESG strategies. In addition, we are currently conducting our annual ESG review of our portfolio companies and will report back on progress to their Boards in early 2023. We score all portfolio companies and benchmark them against each other across over 180 ESG metrics – it has proven to be a powerful way to help them accelerate their progress on ESG.
How are more emerging topics like nature/biodiversity occupying your time and resources?
In 2023 we are keen to understand what Biodiversity means specifically for the technology sector (as we focus on investing in software and service companies).