Bahare Haghshenas, global head of sustainable transformation at EQT, describes the firm’s priorities for the year ahead.
What is your top sustainability priority for 2024? What will count as a success?
A key objective, of course, always remains consistently delivering on the ambitious targets we have set for ourselves to achieve emission reductions at scale. Two years ago, we pledged to set science-based carbon reduction targets for our portfolio, and in 2024, we are looking to set another cohort of businesses on the path to net zero to get us to our goal of 40 percent coverage, by invested equity, of validated SBTs across the portfolio in 2025.
A recent achievement we’re proud of is establishing a platform to collaborate with our investors aimed at helping to advance sustainable transformation in the private markets industry. One of our priorities in the new year is to embed this platform, called EQT thinQ Client Academy, in our community of capital allocators and sustainability experts and spark discourse and collaboration around engaging content. Ultimately, we’d like to play a part in increasing sustainability literacy in our industry.
Over the next two years, we’re looking to increasingly incorporate sustainability in underwriting across all relevant investments in our portfolio. By calculating the cost of delivering sustainability initiatives at acquisition, we’re able to make better-informed decisions on both sustainability opportunities and risks. Grounded in the belief that businesses with more sustainable business models outperform in the long term, we’re always thinking of ways to ensure that businesses owned by EQT will be more sustainable the day that we pass them on to another owner.
Where have you reached on your portfolio decarbonisation/climate journey? What is next on the to-do list?
2023 was an exciting year for us in terms of decarbonisation. Our commitment to the SBTi gained speed – at year-end, 49 portfolio companies had set or were in the progress of setting carbon reduction targets. We’re supporting them on this journey one by one, and I am excited to see how quickly this momentum accumulated into a powerful decarbonisation effort.
To me, this proves the potential of an active ownership model when used to drive sustainability performance. We are able to test initiatives, draw learnings and then scale successes across the hundreds of companies in our portfolio.
Next on our decarbonisation to-do list is to work with our real estate business and define what the pathway to net zero for those assets will look like. We’re looking to set decarbonisation plans for all assets acquired from 2023 within the first 24 months of our ownership.
On an investment theme level, I want to highlight how EQT has been investing alongside decarbonisation trends, partnering with companies that contribute to cleaner mobility by land, sea and air across the world. First Student, which manages North America’s largest fleet of yellow school buses, reached two million miles driven on electric school buses in 2023. Candela has developed an electric hydrofoil passenger ferry that flies above the water, transporting people faster than cars while using 80 percent less energy than a traditional vessel. Electric airplanes, like Swedish Heart Aerospace’s ES-30, have the potential to dramatically reduce the aviation industry’s carbon emissions and noise pollution. These are just some examples of how decarbonisation plays out on a thematic level across our portfolio.
Do you think the industry has now reached a good place in terms of data frameworks?
ESG data and frameworks have indeed come a long way, especially with developments in European legislation, like CSRD and SFDR, including the Principal Adverse Impact indicators and statements. These frameworks have significantly improved the standardisation and comparability of ESG data. This is, of course, very welcome progress for investors like EQT, who are using frameworks to measure and truly understand the impact of our investments and, in turn, make better-informed decisions that align with our commitment to sustainability and long-term value creation.
While strides in standardising data collection and reporting have been made, challenges remain, especially in areas like data quality, granularity and global consistency. EQT is actively engaging in this work, directly and through our partnerships, sharing insight to inform the improvement in ESG data frameworks.
What is the next step in your ESG journey when it comes to nature?
Nature is a really interesting emerging sustainability topic for us. We’ve been participating in PESMIT’s biodiversity working group for some time, and during the past year, this resulted in the report ‘Nature Positive: The Next Horizon for Investors’, which sets a biodiversity agenda for private equity. Learning with peers has been great, and we’re looking to do more of this in the new year. We’d like to contribute to getting the industry to where we are at in terms of climate today, for nature – but faster.
Looking ahead, we’re following the development of the Taskforce on Nature-related Financial Disclosures and Science-Based Targets for Nature closely and assessing the two frameworks’ relevance and applicability to our portfolio companies.
What is the first item on your DE&I to-do list in 2024?
Looking ahead, I am excited about the opportunity to drive DE&I, focusing not only on gender but also on cultural background and socio-economic origin. Implementing a new approach to DE&I is on our to-do list for next year. For some time now, we have been developing an approach that is grounded in science, informed by data and recognises the importance of integrating several diversity characteristics and intersectionality.
I look forward to introducing this approach across EQT next year and to support the business in setting local DE&I targets that take cultural context into account. We’re also exploring implementing this approach in portfolio company leadership to drive DE&I at scale.