What is the secret to effectively engaging with portfolio companies to gather quality ESG data? The answer begins with a data maturity assessment, according to panellists at this week’s Responsible Investment Forum in London.
“We start looking at maturity; where is this company specifically?” Apax Partners head of ESG Ellen de Kreij said on a panel on ESG engagement. “How mature is this business in its journey? Has it done anything on ESG before? Is it ‘medium’ – has it already got some policies, but it doesn’t have targets… etc. And that will inform how we then engage with companies.”
Apax is a stalwart of European private equity and invests in the tech, services, healthcare and internet sectors, according to its website. It launched its debut impact fund last year, for which it has tied a portion of the carried interest to impact KPIs.
“If you have a company that is not ESG mature, then by default probably, the data that you’re going to get if you ask for any information, it will just be rubbish,” de Kreij said. “So then you’ll be moving rubbish through the system that you can’t really do any analysis on. What you need to ensure is that they also understand what things they need to develop in their journey.”
As a result, though Apax’s approach to ESG engagement is always “slightly different”, it is always “very much focused on on the maturity of the businesses”.
John Laing Capital Management sustainability head Sandrine Lalmant emphasised the importance of understanding maturity in a separate panel. Her firm has set one of the most ambitious portfolio ESG targets in the infrastructure space; it hopes to have aligned 70 percent of its assets under management with net zero by 2030, and 100 percent by 2050.
She said: “One of the things that we’ve been doing is that we’ve implemented an ESG maturity assessment that’s based on the key pillars of our ESG strategy. So when people fill in their data, the output of that data is not just a data set, the result is this maturity metric, and that’s a lot easier to discuss [with portfolio companies].”