Renaud Tourmente, deputy CEO and COO at Armen, has a clear resolution to “look at ESG in a positive way” to deliver societal and environment improvement, rather than as simply a set of risks for GPs to mitigate against.

“We have a strong conviction that we need to make a difference,” he tells New Private Markets.

Tourmente founded Armen alongside president Dominique Gaillard and CEO Laurent Bénard in 2022 to acquire stakes in fund managers. The firm’s debut fund held a first close on €150 million in March last year and is seeking to attract €400 million in total. It is targeting traditional private equity returns, and expects to hold companies for an average of six to eight years.

Sustainability has been a priority from the get-go. In creating Armen, Tourmente explains that the founders hoped to move beyond “private equity 1.0” which was “very much focused on IRR” at the expense of non-financial factors. He says: “We need to define private equity 2.0 which develops a way to contribute to society in other ways. For Armen, we defined that as being able to improve the trajectory of the companies in which we invest from a sustainability perspective.”

To substantiate its commitment, the firm was founded as a mission-driven company as defined by the French PACTE law, meaning that it has sustainable objectives written into its constitution. Armen has three non-financial goals: foster equal opportunities; share economic value created; and mitigate climate change and protect biodiversity.

It is in the area of economic value sharing that Armen seems to be taking its most proactive stance. In this sense, the firm is participating in a wider trend within the French private equity market, where the industry association has set a target of having all of its GP members implement profit sharing schemes by 2030.

Armen has a target of ensuring 80 percent of employees at its portfolio of GPs have access to carried interest within a year of receiving investment. The firm has also released a value sharing index, which collected responses from 223 GPs relating to profit sharing within their teams. It found that almost 60 percent of respondents share carried interest among more than half of their team.

At the portfolio level, the firm has tied an undisclosed portion of its carried interest to a goal of having 50 percent of employees at its GPs’ portfolio companies involved in schemes that see them benefit from the proceeds of an exit.

Explaining the decision to be mission-aligned, Tourmente points to several reasons: “If you want to be a successful private equity company, you need to attract talent. The next generation are very focused on ESG topics, so you need to be able to say something that will keep them coming to your company. If you want to exit in five to seven years’ time and you have not implemented ESG policies, you will have fewer buyers.”

Deal making

The firm has invested in two GPs so far, both of which have a sustainability element to their offering. A minority investment in RGreen Invest, a Paris headquartered infrastructure debt provider focused on the energy transition, was announced last year. More recently, Armen took a 32 percent stake in tech investor Jolt Capital.

Jolt’s latest fund – which has now raised €371 million after reopening to investors last year – is an Article 9 fund under EU sustainable finance rules, meaning it has sustainability as an objective and commits to the highest level of reporting on its impact. It aims to avoid 500,000 tonnes of CO2 over the life of the fund “by the products, data or services sold” by its portfolio companies, according to its SFDR disclosure statement.

Of the decision to invest in Jolt, Tourmente says: “There are two elements that were differentiating for us in addition to the quality and track record of the team. One is the proprietary growth platform Ninja, which is feeding them investment opportunities. The other [is] that they have positioned themselves at the crossroad of deeptech and ESG. Fund four and the forthcoming fund five are article nine under SFDR.”

Though its recent investment activity may suggest Armen is on the lookout for companies with an impact angle, Tourmente stressed that the direction of travel is what matters when it comes to sustainability, not the starting point. He says: “We are not going to invest only in Article 9 or purpose driven companies. There is an investable market of 800 mid-market managers in Europe. What we believe is important is the trajectory.”

Moving forward, Tourmente is confident dealflow with increase: “We knew that, when we opened the business, it would take time to generate interest within GPs. GP stakes investing is tried and tested in the US, but there was very little activity in Europe. Now transactions are accelerating in Europe.”