Adinah Shackleton, head of ESG at Permira, 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?
2022 marked the first cycle of the ESG Data Convergence Initiative, which has now reached more than 250 GP and LP members. Although it is a relatively simple concept, I believe it shows that there was a real need for more focus and clarity on ESG reporting expectations. The benchmarking is helping us to understand where the Permira private equity funds sit in comparison to private and public benchmark peers.
Has the private funds industry made progress on climate in the last year? Where are the bright spots? Where has it disappointed?
I believe progress is being made on climate but there are still challenges around things like availability of data – there is certainly more to do in this area. There has been a lack of clarity on the definition of net zero in the context of private equity. Whilst guidelines are evolving, we want to be proactive so are still engaging with certain portfolio companies on carbon.
For us, the bright spots are in the funds’ portfolio where some companies are setting ambitious science-based targets. These companies are leading by example, proving it can be feasible and that it can position companies well for the future.
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 recently hired a new climate specialist – Euan Long. He sits on the investment and ESG teams and will aim to further develop our approach around climate in 2023 and beyond, which we’re really excited about.
In addition, over the next 12 months we plan to continue to work towards our first TCFD report, identify the practical implications of science-based targets, continue the rollout of a new carbon footprinting tool for certain portfolio companies and explore an approach to valuing carbon. It’s early days for us on exploring carbon pricing, but we are keen to understand whether we can use this as a tool to help investment teams better understand the financial impact of carbon emissions and the benefits of reducing them.
Aside from climate, which other areas of sustainability will be prominent on your agenda and why?
We have a few goals in particular for the future:
- Continuing to build our ESG team with new hires expected next year with a strategic or regional focus.
- Refining our approach to ‘values-based investing’, with a focus on the buyout funds. This helps guide investment teams during origination and due diligence.
- Continuing to build on ESG engagement with portfolio companies – we see this as the key opportunity to drive value.
- Further developing our approach to diversity, equity and inclusion (DE&I) – we have set board gender diversity targets for one of the buyout funds and are piloting DE&I tools with certain portfolio companies so that they can assess their approach and identify actions for improvement.
How are more emerging topics like nature/biodiversity occupying your time and resources?
There are some companies in the funds’ portfolio where this is more material. For example, we have recently worked with a company on actions around responsible sourcing which has implications for biodiversity. We have also asked certain portfolio companies in the buyout funds whether they have activities negatively impacting biodiversity-sensitive areas as part of ongoing monitoring. It will be interesting to see how this evolves – it’s an area which may previously have been seen as less material to the sectors Permira focuses on, but I can see it’s quickly moving up the agenda.