The year in review
The year in review
Our Managing Partner, Kurt Björklund, and Head of ESG, Adinah Shackleton, share their reflections on ESG as a lever for value creation during 2022.
Responsible investing and consideration of ESG factors, whether they are risks or opportunities, is a component to Permira’s overarching approach; this flows through to portfolio companies, particularly for the buyout funds, and to our own business."
The rise of regulation is a key factor in the increasing prominence of ESG. This is putting pressure on companies to ensure they are sufficiently resourced to understand and respond to the requirements set by regulation."
Head of ESG
How do you think the ESG landscape has evolved in 2022?
2022 was a year of considerable macroeconomic shocks that affected our industry. We believe that a continued focus on responsible investing and ESG is here to stay because those shocks did nothing to distract investors from the importance of ESG. Ever-rising stakeholder expectations are driving our actions and many business conversations have an ESG element. Responsible investing and consideration of ESG factors, whether they are risks or opportunities, is a component to Permira’s overarching approach; this flows through to portfolio companies, particularly for the buyout funds, and to our own business. We are proud that the British Private Equity and Venture Capital Association recognised Permira with its Excellence in ESG award in 2022.1
ESG continues to evolve. At present, there is a specific focus on climate change, along with diversity, equity and inclusion. We see ESG as central to the creation of long-term value; the companies that get it right stand to get ahead of their competitors and the reverse also holds true: the risk of getting ESG wrong may present an existential threat.
How would you characterise your ESG approach and priorities at Permira?
Our approach to ESG is influenced by our investors, employees, partners and portfolio companies. We aim to bring ESG and sustainability to the heart of our transformative investment approach, particularly for the buyout investments where the funds have more influence. Values-based investing has become more integral to our overall philosophy. We are looking for ways to help companies prepare for the future by engaging with them on climate-related initiatives such as science-based targets and tech-enabled carbon footprinting tools.
We want to accelerate the ESG progress of the private equity funds’ portfolio companies, helping them to do more in the areas that are relevant to their businesses. Lastly, we strive to lead by example at Permira, adopting and exploring the policies and strategies that we recommend to the funds’ portfolio companies.
What is the role of regulation in ESG?
The rise of regulation is a key factor in the increasing prominence of ESG. This is putting pressure on companies to ensure they are sufficiently resourced to understand and respond to the requirements set by regulation. We see good regulation as a positive influence on the industry; streamlining tends to result in a cohesive, coordinated environment, for both companies and investors alike.
How does SFDR affect engagement with portfolio companies?
The nature, extent and type of engagement with portfolio companies varies depending on the type of fund, on the portfolio company itself and on the commitments of the fund under the EU SFDR. Whether it is possible to engage directly, and the extent and type of that engagement, is influenced by a number of factors. These include whether the funds’ investment confers control of the portfolio company, the length of time invested, information available from the company, the maturity of the relevant company’s ESG programme / approach and the priority of ESG given the nature of the company’s sector and activities. Given these factors, in general the greatest opportunities for direct engagement exist with portfolio companies of our private equity buyout funds. There are generally fewer opportunities with portfolio companies of the PGO funds and with companies which have received loans from direct lending funds. For structured credit and CLO management funds there are more limited opportunities for engagement.
How do you measure progress in ESG?
Measurement, with a view to objective comparability, is another key challenge in ESG and Permira is involved in a number of initiatives which are exploring ways for the industry to address this.
Permira is a founding member of the ILPA ESG Data Convergence Initiative, which provides a consistent framework for collecting and reporting ESG data. Similarly, we are in the early stages of exploring the concept of valuing carbon to see if we can use it as a tool to help us improve our understanding of the financial impact of carbon emissions and the benefits of reducing them. In 2022, we forged an exciting partnership with a technology platform, Watershed, that helps organisations identify, measure, track and manage their carbon emissions. We began using this tool ourselves in 2022 and are recommending it as an option for portfolio companies as well.
offices across Europe, North America and Asia
businesses backed over 35+ years
ESG team members2
BVCA Excellence in ESG award 20223
of our investment team are women (up from 19% in 2020)
reduction in Scope 1 and 2 greenhouse gas emissions5 since 2021
grants deployed by The Permira Foundation6 to almost 100 charities
PE buyout fund portfolio companies
First Article 8 fund7
VBI framework8 started implementing for Permira VIII
of companies have an ESG working group or committee
of companies have board oversight of climate risks
of companies have a DEI steering committee
of companies procuring or generating renewable energy
companies with a science-based target or net zero commitment
invested in private credit
of investing in European companies
portfolio companies backed
Dedicated ESG lead hired for Permira Credit9
First ESG margin ratchet executed for direct lending strategy
of CLO managers are PRI signatories, of those surveyed in structured credit annual ESG questionnaire
Permira in a changing world
At Permira, we believe our extensive cross-sector and ESG expertise, combined with a strong collaborative culture and established track record, enables us to pivot to evolving market and ESG megatrends.
What we are seeing
Over decades, the Permira business model has sought to adapt to ESG megatrends and regulatory change.
- Geopolitical disruptions
- Inflationary risk
- High valuations
- Increasing volatility
- Supply chain disruption
Impact of technology
- Staying ahead of the curve
- Large opportunity in technology and cross-sector themes
- Importance of data integrity
- Significant disruptive force
- Physical, transitional and reputational risks from inaction
- Increasing importance of biodiversity and protecting our planet
Permira believes that enabling long-term value creation for investors and wider stakeholders requires a forward-thinking and collaborative mindset. A key part of our business model is about transformational investing at scale. Through a thematic, growth and sector-focused strategy, we seek to build lasting value across the private equity funds’ portfolio companies.View our business model
1 Includes Permira Credit.
2 Including new ESG / Climate Specialist, Permira Credit ESG Lead and ESG Associate. Permira Credit ESG Lead and ESG Associate joined in February 2023.
3 This award was provided by British Private Equity and Venture Capital Association in 2022 and covers the period of January 1, 2022 to December 31, 2022. This award is not indicative of future performance, of all investments made by a fund, or of any client’s or investor’s experience with Permira. British Private Equity and Venture Capital Association’s selection to receive this award may have been based on a limited universe of participants, and therefore there can be no assurance that a different sampling of participants might not achieve different results.
4 Carbon neutrality refers to Permira’s business operations and business travel (i.e. Scope 1 and 2 GHG emissions, and category 6 Scope 3 GHG emissions, only). For 2021-2023, certified carbon emission reduction credits have been purchased from Climate Impact Partners as part of the commitment to annual renewal of the firm’s CarbonNeutral® status. The CarbonNeutral Protocol was created and is managed by Climate Impact Partners.
5 Permira’s Scope 1 and 2 emissions reduced from 731 tonnes CO2e in 2021 to 471 tonnes CO2e in 2022.
6 Registered Charity in England and Wales (1175061). Company Limited by Guarantee, Registration No. 10877948. Registered Office: Permira Advisers LLP, 80 Pall Mall, London, SW1Y 5ES.
7 Reclassified most recent buyout fund (Permira VIII) to Article 8 under SFDR. Fund-level targets set relating to governance of ESG, climate and board gender diversity.
8 Values-based investing framework.
9 Joined January 2023.