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Industry events / 07 October 2021

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

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

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

The event, which is deemed to be the UK's premier private equity and venture capital conference will take place online whilst this year’s exclusive roundtable discussions and networking events will take place in person.

Read our key takeaways below from the second part of Day 2 at BVCA Summit.

 

MEASURING THE INDUSTRY'S ESG CONTRIBUTION

This panel was moderated by Andrew Probert, Managing Director, Transaction Advisory Services, Duff & Phelps, A Kroll Business, who invited participants to share their own perspectives, of which the below is a brief summary.

Joana Castro, Principal, Private Equity, Unigestion

  • ESG for us is integrated into the investment process.
  • We start pre-investment, in the 'get to know' phase.
  • Later on, we collect 20 ESG KPIs on an annual basis.
  • Benchmarking is core to us.
  • We are unhappy about target-setting as it currently exists but we have to start somewhere. For investee companies, we focus on evolution from entry to exit, handholding where needed.


Paulina Murphy, Engagement Director, World Benchmarking Alliance

  • The industry is on the verge of going big and data on companies and their impact on the planet is at the core.
  • Our methodology can be used by any investor in any company in any sector.
  • The most engaged companies have a better history of disclosure, but handholding by investors can be very important.
  • Scientifically based targets are particularly important in relation to future growth.
  • Even the best performing companies are not doing very well. Benchmarking highlights areas for improvement.
  • Where government works with the private sector, transformation is achievable.

 

FINANCING TO SUPPORT NET ZERO

Moderated by James Cundy, Managing Director, Head of Structured Finance UK, HSBC, this panel addressed the critical role that finance will play in supporting the transition to net zero.

Andrew Hodgson, CEO, Beck & Pollitzer

  • ESG is at the heart of who we are as a business and how we approach our market and activities. Having an ESG policy is critical in attracting recruits, especially younger ones.
  • We play a pivotal role in helping companies transition from the internal combustion engine to other forms of power.
  • We do it locally, not moving large numbers of people around the world.
  • We've lived and worked through a number of seminal changes in manufacturing.
  • A critical change that needs to continue is clients accepting the need to reduce their carbon footprint. That involves a cost that competitors might not have. 

Mike Innes, Senior Partner, Graphite Capital 

  • Our investment process from entry to exit tracks the ESG progress made by investee companies.
  • Most of our companies have a CO2 policy.
  • Accuracy of data and clarity of objective are essential to achieving the desired change.

Robert King, Head of Sustainable Finance, HSBC

  • Finance is important and HSBC is committed to helping achieve net zero, providing up to $1trn to help that globally over the next few years.
  • We are looking to take our ESG expertise into the private equity market.
  • But there are risks, especially around accusations of greenwashing, which presents reputational risk. 

 

PRESENTATION OF EXCELLENCE IN ESG

Tomas Sys, Principal, Ramboll, presented the ESG excellence awards, saying that the quality of submissions this year has been higher than before and that he looks forward to that trend developing further in 2022.

LP: the winner is Church Commissioners for England.

GP firms: joint winners. AuM below £1bn and AuM above £1bn.

AuM below £1bn: the winner is Beringea. Commended: Palatine and Permira

AuM above £1bn: the winner is EMK Capital.

ESG sustainability: Winner is Weener Plastics.


SUSTAINABLE AND IMPACT INVESTING – A GREAT OPPORTUNITY

Michael Moore, Director General, BVCA, interviews Philip Newborough, Co-CEO, Bridges Fund Management

  • We face two massive generational challenges, to transition to a more sustainable economy and to a more diverse economy.
  • There are many businesses around the world making contributions to these.
  • Private equity has the biggest role to step forward and face these challenges head on.
  • With World of Books, we put purpose at the heart of the business, avoided sending tons of waste to landfill and returned six times investment to our LPs.
  • Not taking action is not an option. If you own something and you break it, you fix it.
  • The world needs to set difficult targets and then we work out how we will meet those targets.
  • We need to do so much more across asset classes to meet Paris targets. The challenge is huge. This is an even bigger challenge but it is the investment opportunity of a lifetime.

 

EMERGING MANAGERS AND WHAT NEXT FOR IMPACT FUNDING?

This panel, moderated by Lindsay Smart, Head of Sustainability, Triple Point, looked at the possible future for impact funding.

Camilla Dolan, Founding Partner, Eka Ventures

  • There is an unprecedented opportunity to rewire the economy and achieve net zero.
  • Solving the problems of our times is a huge economic opportunity. Founders are looking to solve those problems and our pipeline is healthy.
  • As investors, you want to evidence that investment generates returns.
  • Covid has made people wake up to the possibilities for sickness prevention as well as treatment.
  • The more capital that comes in, the better. But there can never be too much when you are trying to change an entire system.

Justin MacRae, Chief Operations Officer, Fortunis Capital

  • We are in the age of innovation. We can solve global problems through technology and scaling, and make them opportunities.
  • There is a lot in the pipeline. As a Home Office-sponsored body, we see thousands of applications a month. 

Stephen Muers, CEO, Big Society Capital

  • We see real momentum, in long-term health issues, innovation in fintech and education, the last one given new impetus by the pandemic.
  • We have some investors who understand impact, in their different ways. Education of potential investors is always part of the process.
  • The opportunities are growing. We look for impact flowing through everything. Investment thesis. Selecting investee companies. Managing the investment going forward.
  • People should expect the unexpected.

 

IS IMPACT GOING MAINSTREAM?

Alistair Brew, Head of Investment Operations, BGF, welcomed the three panellists and began by asking each for their view of the subject. He then asked each for their thoughts on whether impact investing is becoming mainstream and if not now, what would be a likely timeframe, how have they found LP expectations evolving, what obstacles do they face?

Rami Bibi, Head of Europe, Global Impact, KKR 

  • ESG for us is at the heart of everything we do across all funds and across all asset classes. Everyone should be doing positive things.
  • We are hiring people who are really interested in impact. This is a generational shift. We are seeing a lot of competition for capital formation but not around asset selection as it takes longer than people realise to build out systems and teams. Impact is growing and it is a good thing that it is growing.
  • When talking to GPs, do not be shy about asking them impact.
  • Government regulation can help.

Beth Houghton, Partner, Palatine

  • We started looking at ESG 12 years ago and won an award here earlier today. We then went a step further with impact investing.
  • When we set up our first fund, we set out to make sure impact could make investment returns.
  • For many of us, it was the first time investors had invested in impact. More have come in subsequently and we hope we will see more impact funds raised.
  • Managers are now more aware of the asset class and the returns it can generate.
  • From the first one, we learnt a lot and have become much more sophisticated. Impact is a journey where you are constantly learning and the asset class keeps improving. LPs are becoming more sophisticated and expect more and hold you to higher standards.
  • I wouldn't advise any traditional investor to come into impact unless they are passionate about it.

Paul Miller OBE, Managing Partner, Bethnal Green Ventures

  • We invest at the very early stage and ESG has been like a starter drug. Impact is the next level, of positive investment. 
  • We are seeing very mainstream VCs investing in our companies. The mainstream is becoming more impact and impact is becoming more mainstream. Bigger investors, from high net worth individuals to institutions, are buying into impact.
  • But watch out. A lot of people will say they are doing impact but, but won't actually be doing it, and will be found out.


HOW IS THE INDUSTRY SUPPORTING THE TRANSITION TO NET ZERO?

This final panel of the second day was moderated by Kerry Baldwin, Managing Partner, IQ Capital, and BVCA Chair 2021/22. She invited participants to talk briefly about their investments, asked whether there is enough intellectual commitment and financial funding, whether clusters are developing and whether skill gaps are developing in the UK.

Dr Andrew Coburn, CEO, Risilience

  • There is an increasing appetite for analytical data to help companies make investment targeted at net zero. Their concerns range from natural disaster to carbon pricing and changes in consumer behaviour patterns. You need deep science insights to make these decisions.
  • Companies are pledging to erase millions of tons of carbon from their output and we can help with the decision making.
  • Businesses could lose 5% to 10% of their value over the next few years by not acting, and while some investors are querying whether we are seeing over-investment, businesses who do not make the investment will become dinosaurs.
  • The UK is particularly strong in analytics and interdisciplinary insights, bringing together different knowledge, experience and opinions, and non-lateral thinking and problem-solving.
  • Gaps? Standardisation. Co-ordination. Data reporting metrics. All could be improved.


William Goodlad, Principal (Deep Tech), Oxford Sciences Innovation

  • We are seeing clusters in Oxford. Re skill gaps, international talent is here. We are very good at attracting it, at the entrepreneurial level as well. We have been lucky in that respect. 
  • The computer power needed in the future will be enormous and that is something where the UK is well positioned.


And Philip Newborough, Co-CEO, Bridges Fund Management, returned to the stage to help bring proceedings to a close

  • There have been great examples of businesses contributing to net zero, but not enough has happened.
  • We are on red alert as to life on our planet and much more needs to be done to meet Paris targets.
  • We look for businesses that make great returns for investors but meet the net zero challenge.
  • The cost of not acting is greater than the cost of acting. PE is one of the most powerful tools available to help. We should support the transition. Committing to net zero can be uncomfortable for some asset managers but it is necessary.
  • All investment managers across all asset classes have a role to play. Innovation and technology do not represent a silver bullet. We have to act, and act fast.
  • Innovation has a massive part to play in the process.

 

CLOSING REMARKS

In his closing remarks, Michael Moore, Director General, BVCA, bade a general farewell to the audience, reflecting upon another amazing day and saying thank you to all the unsung heroes behind the scenes who made the event possible, and that he was looking forward to the planned evening reception and rubbing shoulders with, inter alia, GPs and LPs. 

Presenter Amy Abbott said she had learnt a lot, and particularly mentioned Lord Browne. She also advised that anyone wanting to learning more about the day's main topic, ESG, should look out for the BVCA's new report on the subject. 

Fellow-presenter Leon de Bron took the opportunity to re-emphasise the importance of case studies in educating the world beyond PE/VC about the value of PE/VC.
 

 

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