British impact manager Future Business Partnership has achieved the highest score of any UK business in the B Corp assessment, and the highest of any PE manager in the world focused on developed markets, according to a statement from the firm.
FBP was founded in 2019 by ex-Bluegem partner Vish Srivastava and former Terra Firma director and Neo Investment Partners managing director Tracey Huggett to invest in sustainable household consumption companies. It has completed two deals so far: Dutch baby care company Naïf; and Big Green Smile, a European retailer of sustainable home and personal care products. Its team includes four full-time employees.
B Corp status is an independently verified certification of a company’s sustainability credentials. It is administered by US non-profit B Labs, which measures the impact of companies’ operations on the “environment, communities, customers, suppliers, employees and shareholders” using its B Impact Assessment Tool. The certification has been conferred on several private markets firms including Astanor Ventures, Verdane, TowerBrook Capital Partners, Helios Investment Partners, Summa Equity, Atomico, Ambienta, Abris Capital Partners and Newcore Capital.
FBP’s score of 174 is the highest in the world among equity investors and investment advisory firms, according to the statement. By comparison, Astanor Ventures scored 121.3 last year, which the firm claimed was the highest score of any VC manager at the time, while British and Irish manager Business Growth Fund achieved a score of 97.5 last month.
Part of the reason for its high score is that FBP has integrated the B Labs impact assessment across its business operations. “We use the methodology to screen for investments and make sure we’re investing in the right businesses that are doing good for people and planet,” Srivastava tells New Private Markets. “We also run it through the management incentive plans, the staff incentive plans. If we’re in the minority, we run it through our minority protections and legal documents. It runs through everything that we do.”
In this vein, the firm used B Labs’ methodology to link 100 percent of its carry to impact goals. FBP uses the non-profit’s impact assessment to report on the impact performance of its portfolio companies periodically. For the firm to earn any carry on exit, the portfolio company must have improved its score compared to when it received investment.
Impact-linked carry is still emerging as a concept and the approach varies from fund to fund. Typically, a portion of the carried interest (examples range anywhere from 10-100 percent) will only go to the general partner if certain impact or ESG targets are met.
“We have a head start here in that the companies in which we invest are actively looking to work with an impact-driven partner,” Srivastava says. “The difficulty that a lot of firms have is convincing their underlying investee companies to provide the requisite data to be able to track impact in order to link their carry to it. We don’t have that issue.”
Thus far, FBP has been raising capital on a deal-by-deal basis, primarily from pension funds, but there is a possibility that the firm will launch a fund in the next 12 months.
Huggett says: “Obviously the objective is to raise a fund, and we hope 2024, with the momentum off the back of our two investments, will be a good moment for us.”
Even if a fund doesn’t materialise, the firm expects B Corp certification to help make it an attractive partner for potential target companies, says Huggett. “For us to be authentically aligned with the kind of businesses that we want to partner with, [which are] businesses that are differentiating by virtue of their sustainability and their ethics, we needed to be recognised.
“There are a growing tribe of B Corps, it’s across every sector, but particularly in consumer.”