Kurt Björklund

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

Adinah Shackleton

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.

Kurt Björklund

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.

Adinah Shackleton

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.

Adinah Shackleton

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.

Kurt Björklund

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.

Adinah Shackleton

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.