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Industry events / 07 October 2021

BVCA Summit 2021 - Day 2 key takeaways (part 1)

BVCA Summit 2021 - Day 2 key takeaways (part 1)

Across the BVCA Summit 2 day event Crestbridge will publish a brief rundown of key takeaways from each session as the event unfolds. 

The second day at the BVCA 2021 Summit launched with a brief welcome from Michael Moore, Director General, BVCA, moving on quickly to the first formal topic of the morning.

ESG and climate solutions provided the main context of the morning and early afternoon sessions, some of the key points addressed in which feature in the short summaries below.

WELCOME: THE CLIMATE AGENDA – PRIVATE CAPITAL’S CONTRIBUTION

Michael Moore, Director General, BVCA

Gurpreet Manku, Deputy Director General and Director of Policy, BVCA

  • This is a journey for many firms. 
  • At PE/VC firm level: it has gone from risk mitigation strategy to identifying opportunities.
  • We published our first guide in 2010.
  • Integrating ESG into investment processes
  • Regulation often follows market process/events.
  • ESG is a crucial part of the business process for fund raising and investment.
  • Paris has accelerated change.
  • Over 100 members working on common methodology.
  • We can work with portfolio companies on reducing carbon impact in a way that will impact individual day to day life.
  • Regulators are looking at claims made for ESG products.

Sara Rajaswaran, Director, External Affairs, BVCA

  • Climate change is a major issue.
  • Cop 26. The annual opp for international governments to be locked in a room and discuss how they are going to tackle climate change.
  • The most significant so far was Cop 21 in 2015 in Paris, which created the Paris Agreement 
  • All eyes will be on Glasgow in November.
  • Domestically: Puts the UK on the global stage. The PM is personally committed to climate change. This will be a big part of his personal legacy.
  • Internationally: everyone involved in organising the event will be running around now trying to agree what will be announced. PM thinks this will be bigger than Paris.
  • PM wants to see more international businesses sign up to race to net zero.
  • We want to see more companies being made 'sustainability fit'.


TRACKING PROGRESS: WHERE ARE WE NOW AND WHERE ARE WE GOING TO BE?
PRESENTATION

Suzi Gillespie, Head of Research, BVCA

This presentation by Suzi Gillespie, Head of Research at BVCA, is a whistlestop tour of the results of a BVCA ESG survey in the summer, briefly featuring highlights from a range of responses from a range of those approached.

  • 85% say ESG is important to investors...so long as there is still investment return.
  • The vast majority have an ESG policy in place or will do soon. Only four of our 119 respondents did not.
  • 73% of investors have no funds subject to the EU sustainable finance disclosure regulation
  • Fewer than half of portfolio companies currently comply with task force climate reporting requirements.
  • 70% of respondents say portfolio companies have carbon reduction plans in place.
  • 40% have announced net zero carbon targets for portfolio companies.
  • 58% say their firm has signed up to PRI (principles for responsible investment).


INVESTING IN CLIMATE SOLUTIONS: FIRESIDE CHAT

This session took the form of a fireside chat between Michael Moore and Lord John Browne of Madingley, Senior Adviser, General Atlantic, formerly CEO of British Petroleum, and arguably the first major CEO to recognise climate change.

Interviewed by Michael Moore, Director General, BVCA

Lord John Browne of Madingley, Senior Adviser, General Atlantic, formerly CEO of British Petroleum, first CEO to recognise climate change

  • 23 years ago, what was a big problem was becoming an even bigger one.
  • I set out action BP would take: I was told by other oil companies and organisations that BP had 'left the church'.
  • The BP team believed in the issue more than others and kept saying so to friends and families.
  • NGOs and politicians said it was unreal and asked us to show what we were doing. We were accused of greenwashing. That was not true.
  • We committed to invest $1bn a year and 23 years ago $1bn was a lot of money.
  • We realised the escape of methane (natural gas) is 100 times more powerful than carbon dioxide as a greenhouse gas. Stopping it leaking and selling it could reduce overall costs.
  • Themes are much louder and much bigger today.
  • Climate change was a big problem, now it is a gigantic problem.
  • Wild fires. Desertification.
  • As an engineer I would say this, but engineering is magic. The more you do of it, the better things are. We can do things today that we couldn't imagine before. But this won't work without investment. And the private sector cannot do it on its own. Governments must help.
  • Venture capital cleantech is alive and well.
  • Change the way we eat, the way we farm, is important. Eat less beef. We need to figure out how to use less land. Vertical farms.
  • I do believe the combination of great brains and money will deliver breakthroughs.
  • How can we transition from oil and gas, and decarbonise it to make another form of energy. I just hope we can do it in time.
  • I'm all in favour of action, setting real targets and measuring against targets. But I would say that, wouldn't I?


NET ZERO ALIGNED INVESTING: FIRESIDE CHAT

This second fireside chat of the morning saw Jonathan Bailey, Head of ESG Investing, Neuberger Berman, interview Faith Ward, Chief Responsible Investment Officer, Brunel Pension Partnership, and Chair, Institutional Investors Group on Climate Change.

Interviewed by Jonathan Bailey, Head of ESG Investing, Neuberger Berman

Faith Ward, Chief Responsible Investment Officer, Brunel Pension Partnership, and Chair, Institutional Investors Group on Climate Change

  • We ask all our investment managers to be thoughtful of climate change.
  • There are opportunities to be managed as well as risks.
  • VC/PE is important.
  • I ask VC/PE managers to make a net zero commitment. There is a real opp to make impact changes, that are climate-lite but help solve wider society and economic problems.
  • The objective is that GPs have a credible net zero programme.
  • We're not looking to reinvent methodology.
  • The motivation is to create a flow of capital.
  • Taxonomy definitions will help create that flow.
  • The clock is ticking.
  • Current ambitions do not add up to net zero. Need to increase those ambitions.
  • We need to be taking action now.
  • Government targets for eliminating the internal combustion engine are super-helpful.
  • We do need policy framing, instruments and incentives to balance the risk-reward equation in making investment allocations.
  • There is a lot for politicians to do and a lot is resting on it.


HOW DOES THE INDUSTRY CONTRIBUTE TO THE NET ZERO AGENDA?

This panel was moderated by Jonathan Bailey, following on from his fireside chat. His panellists, Graeme Ardus. Head of ESG, Triton, Katharina Neureiter, Head of ESG for EMEA, Carlyle, Padmesh Shukla, CIO, TFL Pension Fund and Zoë VanderWolk Investor Relations & Sustainability Manager, ETF Partners, made a number of interesting points.

Panel moderated by Jonathan Bailey, Head of ESG Investing, Neuberger Berman

Graeme Ardus, Head of ESG, Triton

  • Data drives the discussion.
  • Capturing data at investee companies drives investment.
  • The idea is to align and co-operate.
  • How can we learn together faster? Awareness-raising training for investment professionals.
  • Carbon footprint guide will be available around the time of Cop 26.
  • Companies we are investing in today: who will acquire those in several years time?
  • Data underpins the discussions and helps build the framework to futureproof investment.

Katharina Neureiter, Head of ESG for EMEA, Carlyle 

  • Data convergence product is built on a very simple idea. Let's agree on six metrics and benchmark against those.
  • Good ESG data is essential to make good progress in reducing carbon.
  • We very much believe in a 'change over time' ethos.
  • Change energy mix into more renewables.
  • Reduce the intensity of carbon.
  • Roll up your sleeves. This will be a big growth area. 
  • If governments back up policy declarations with policy action it might make a difference.

Padmesh Shukla, CIO, TFL Pension Fund

  • Climate is only one part of the agenda.
  • Sustainability to ESG to climate change.
  • It is not just about targets.
  • I don't see any contradiction between our 2045 goals and what private equity does.
  • Private equity will play an important role.
  • Step change needs to happen.
  • On regulation, the thing is to get the balance right.

Zoë VanderWolk, Investor Relations & Sustainability Manager, ETF Partners

  • We invest in companies whose carbon emissions are ahead of them, not behind them.
  • We invest in young fast-growing companies. We invest only in sustainable investees.
  • It's more important than ever to put in net zero policies early. Think about future emissions now. Plan for the future and be a more attractive acquisition target in that future.
  • Get the software in. Get the tools in. Get the data in.
  • Everybody wants to be in this area.

 

HOW WILL THE INDUSTRY NEED TO REPORT ON CLIMATE?

Melissa Ferraz, Managing Director, Global Head of eFront Insight at BlackRock, moderated this panel, featuring Maria Carradice, Managing Director, Portfolio – ESG, Mayfair Equity Partners, and Chair, BVCA RI Advisory Group, Michael Marshall, Head of Sustainable Ownership, Railpen and Eimear Palmer, Managing Director, Responsible Investing Officer, ICG

Panel moderated by Melissa Ferraz, Managing Director, Global Head of eFront Insight at BlackRock

Maria Carradice, Managing Director, Portfolio – ESG, Mayfair Equity Partners, and Chair, BVCA RI Advisory Group

  • You need to understand what investors need for their own reporting as well as your own reporting requirements.
  • You should also ask whether you should be reporting on issues whether or not you are required to.
  • In terms of carbon emissions, start on data work as soon as possible.
  • Educate companies on why data is required on an ongoing basis, and on adjusting systems if need be.
  • Accessing even basic data can be difficult, especially if a company hasn't been required to before. 
  • As a fund manager you should be looking at that yourself in-house so you understand the issues and the assumptions and the practicality of getting good quality data.
  • We need to embark on an education drive.

Michael Marshall, Head of Sustainable Ownership, Railpen

  • Risk and impact are distinct.
  • Committing to net zero is part of impact which requires due diligence and investigation of possible consequences.
  • Risk is non-negotiable. 
  • Standardisation is important. Different people have different definitions of and views on what needs to be reported.
  • It is better to be roughly right than precisely wrong.
  • If information is standardised coming in, it can then be used in a proprietary way.

Eimear Palmer, Managing Director, Responsible Investing Officer, ICG

  • It's important to differentiate when we need data.
  • We need to determine how a company is managing risk.
  • Most companies we invest in have not done a carbon assessment; we start work on that immediately.
  • Influence upon management depends on where you sit in a company's capital spectrum; equity has more influence than debt.
     

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