Jean-Rémy Roussel, CVC’s ESG expert, discusses the importance of integrating ESG in private equity investments. Topics include embedding ESG in value creation plans, integrating ESG and CSR, investing in industries with outdated practices, applying ESG principles for company performance, and the significance of non-financial KPIs in driving financial growth.
Embedding ESG in a value creation plan can drive share gain and enhance financial performance.
Integrating ESG at every level, from the boardroom to the frontline, is key to achieving desired outcomes in private equity.
Deep dives
CDC's Approach to ESG: From Threats to Opportunities
CDC, a private equity firm, recognizes the potential disruptive impact of digital technology and the environment. By integrating ESG into their value creation plan, they have discovered that it can drive share gain and enhance financial performance. They emphasize the importance of putting the customer at the center of the value creation plan, using data on customer satisfaction and feedback to improve the company's product and service. Additionally, they engage employees by measuring and improving their level of engagement and commitment to the company. CDC also takes a pragmatic approach to the environment, focusing on reducing resource consumption, energy waste, and negative environmental impact.
ESG and Investment Decision-Making
CDC grapples with the question of how ESG should determine the industries and companies they invest in. They consider both the option of avoiding industries that have negative impacts and the prospect of investing in companies that need restructuring to reduce their negative impact and become more responsible. However, they firmly reject investing in industries such as tobacco and alcohol. They also discuss the idea of transforming industries such as plastic packaging by making them more environmentally responsible.
Linking ESG to Financial Performance and Operationalizing ESG
CDC outlines how they link ESG to financial performance throughout their value creation plan. They focus on customer satisfaction, efficient operations, employee engagement, and environmental impact. They incentivize management by tying bonuses to improvements in these areas. By showcasing non-financial KPIs along with financials during a company sale, CDC demonstrates the value of their ESG-focused approach. They stress the importance of integrating ESG at every level, from the boardroom to the front line, to drive the desired outcomes.