Private equity

ESG has gained a strong foothold in private equity. The rising number of UNPRI signatories is an indication that investors are increasingly recognising the importance of ESG as risk mitigation tool and as a driver of value creation.

While the ESG landscape has matured relatively well for private equity, firms often struggle with designing their approach and implementing it into their investment processes.

We have assisted many private equity funds with ESG integration. Having carried out in-depth assessments of more than 300 (portfolio) companies on an annual basis, we know how to identify risks and value-creation opportunities. With this experience, we built our comprehensive solutions repository to determine actionable solutions and track progress on related KPIs. We help companies to get a clear vision on future developments and redefine their roles. Working in tandem with your firm, our insights are translated into sharper strategies, clearer positionings, bankable business plans, and the design of future proof organisations. Our ESG products are designed in such a way to link the equity story with the sustainability opportunities to get the most value for your companies:

Integrate ESG into your investment strategy and positioning

The importance of responsible investment practices within Alternatives is on the rise. Investment firms recognise the need to create and implement a robust ESG policy and process, but few have the resources and skills required to do this. Integrating ESG into an investment strategy, in such a way that it truly delivers on the value-creation opportunities in their portfolio and pipeline, is a huge challenge.

But we can help.

Our experienced consultants can assess your ESG exposure and determine how relevant factors might impact your current and potential portfolio. Leveraging this knowledge, we can help you design your particular ESG approach fitted to your investment strategy and processes that will not only satisfy the most demanding stakeholder but will also identify undetected risks and capture the most potent opportunities for value creation. We can provide you with the right amount of customisation, helping you develop and deliver the very best ESG strategy for your needs with the benefit of our years of experience.

Create an ESG policy true to your objectives, enhanced by our experience and best practice

Without a robust ESG investment policy, institutions leave themselves open to all manner of investment and reputational risks. A bespoke policy based purely on your specific return and deployment objectives may feel like a better fit, but it can suffer from being too narrow, focused on your own institution’s past successes and failures; thus missing the opportunity to draw on a larger body of experience, across the asset class, and beyond.

In a joint effort with your team and your key stakeholders, our consultants will adapt our best practice ESG policy models to match your requirements. We consider the risk appetite and tolerances of your stakeholders while addressing specific investment strategies in your chosen areas of focus.

The result is a policy that helps you identify risks and opportunities before investment and provides the information and tools to manage the existing risks, and those that may yet appear, in your portfolio.

Invest with greater conviction, knowing that your ESG exposure is quantified and manageable

Whilst significant impact from both a risk management and value creation perspective can be made post-investment, high quality due diligence can help focus resources on the right deals, preparing the way for impactful transformation.

ESG issues can be difficult for generalists to identify and evaluate. Even if traditional due diligence approaches may spot, if not wholly understand, some risks, they are much less likely to discover the value-creation triggers in any given business from ESG.

We conduct ESG risk assessments to uncover red flags and identify value-creation opportunities. We build a model for each of your potential investments that considers how the industries will likely evolve, from a sustainability perspective, and evaluate how well each company will likely perform in that new environment.
The result for you is a portfolio that has been significantly de-risked prior to investment and which is better prepared to thrive long term.

Substantiate your ESG credentials, whilst identifying risks and value creation opportunities as soon as they arise.

Many overlook the importance of truly integrating ESG into their business by embedding it into their equity story (and capex plans) from the beginning. Real value and progress materialise overtime when opportunities are harnessed. Well defined action plans to monitor and improve will enable this.

We apply a standard four-step approach to assess the ESG exposure and performance of portfolio companies, identify KPIs and develop value creation roadmaps:

1. Long-term vision

First, we look at the relevance of ESG in the company’s industry and create a long-term vision on where this industry is moving

2. ESG materiality

Using our ESG framework, we create an industry heatmap, highlighting the frictions between operations in the supply chain and a sustainable future

3. Company performance

We assess the company’s performance on material ESG issues based on desk research, company visits and discussion with management

4, Objectives & KPIs

Together with company management we identify opportunities for improvement, set objectives and KPIs, and develop a strategic roadmap – we monitor progress annually

With our help, you will be able to give your stakeholders what they want – not just accurate ESG reporting, but improved performance, owing to your ability to act sooner when value creation opportunities arise through ESG management.

Use our award-winning reports to provide transparency whilst complying with relevant regulatory standards

The vast amount of different reporting obligations on various ESG issues may overwhelm you as an investment firm.

To comply with the most demanding stakeholders, we have developed a proprietary framework that is compatible with international industry standards, including UN PRI, SASB, SDGs, and TCFD. Our award-winning suite of reporting tools provide you with indications of both risks and opportunities in the portfolio. We conduct individual company assessments and reports, and aggregate findings in a portfolio report. Our portfolio report includes all the information you need to satisfy your stakeholders, benchmarked against internal and external averages.

We can help you determine your reporting needs and support you in the reporting process. We have a state-of-the-art online data platform in place, SpringIQ, which facilitates the data gathering phase for your portfolio companies and have all the required reporting systems to provide you with comprehensive ESG reports.

Enlighten your investment managers on portfolio best practices, regulatory developments, and value creation

The landscape of ESG is constantly moving and developing rapidly. and so is the relevance of it to your investment practices.

Having been in the field for 10 years, we have seen the picture change. Our interaction with and reviews of thousands of companies over the years have sculpted MJ Hudson Spring’s expertise. We have highlighted many ESG related risks and opportunities that should be considered at the top of the agendas of senior management. We have helped our clients create value from these findings by reducing risks, reaping cost saving potential, and rethinking propositions and business models.

We can help to train your investment managers and analysts to consider an ESG lens in their decision-making and to recognise the practical applications of ESG faster. Incorporating ESG into daily decision-making will ready your investment firm for the sustainable future of finance.

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