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Doughty Hanson and WWF report highlights the value to the private equity industry of embedding sustainable investment into its business model

Doughty Hanson & Co, one of the largest independent private equity firms in Europe, has partnered with the WWF to launch a new report today highlighting the increased returns that private equity firms can generate from a more sustainable approach to investing.

The report, produced with the advice and support of PwC, and titled "Private Equity and Responsible Investment: An Opportunity for Value Creation”, argues that private equity companies are particularly well placed to promote sustainable business practices through active management of their portfolio companies – and they are increasingly being encouraged to do so by investors. It shows how a responsible investment approach can create additional value for all stakeholders and reduces the financial and reputational risks to which they are exposed.

Commenting on the report, Adam Black, head of sustainability at Doughty Hanson & Co, said: “The private equity industry is skilled at building better businesses and is therefore well placed to drive through the principles of sustainable investment into their portfolio companies. The report demonstrates how value creation requires increasing the operational efficiency of portfolio company operations – not solely in traditional financial terms, but also in terms of natural and human capital. Those firms that understand this will give themselves a long-term, competitive advantage.”

The report finds that, given the simultaneous growth of both the sustainability agenda and the private equity industry over the last decade, sustainability now represents an opportunity for private equity firms to increase the value of their underlying investments. Throughout the investment cycle, from pre-investment screening through the ‘hold’ period to exit, integration of ESG (environmental, social and governance) issues into core processes allows for risk to be mitigated and value to be enhanced. Due to its unique governance model, the private equity industry is in a stronger position than most of the asset management industry to drive the sustainability agenda.

Looking ahead, the report highlights a number of points for the industry to bear in mind:

• Private equity houses will continue to focus on value. There is likely to be a common recognition that creating value is inextricably linked to supporting the sustainability performance of portfolio companies
• There is a growing need for access to competent expertise, particularly where portfolio companies lack the necessary skills or understanding to manage ESG issues themselves
• A broader range of ESG issues must be addressed, beyond focusing only on issues of environmental efficiency – including maximising human capital, product stewardship and supply chain management
• ESG issues should be considered throughout the lifecycle of a deal, rather than at particular stages only, such as pre-investment screening
• Private equity houses should be encouraged to adopt more open reporting principles, building disclosure of ESG issues management into their overall reporting systems
• The industry should work in partnership, where appropriate, with respected external organisations such as WWF to address challenging issues relating to sustainable development

Patrick Laine, Director Corporate Partnerships, WWF-UK, added: “The findings show that by implementing a minor shift of their business models to focus on sustainability issues, private equity firms can certainly generate increased value. As a result, it is essential that private equity companies are clear, internally and externally, about how they are supporting portfolio companies to realise value from ESG management.”

Notes to Editors:

1. The report Private Equity and Responsible Investment: An Opportunity for Value Creation, is available here: http://assets.wwf.org.uk/downloads/private_equity_aw_lores_2.pdf  

2. Doughty Hanson & Co (www.doughtyhanson.com) is one of the largest independent private equity firms in Europe with offices in London, Frankfurt, Luxembourg, Madrid, Milan, Munich, Paris and Stockholm. Since 1985, Doughty Hanson has established a strong track record of buying and developing market-leading businesses in Europe and has undertaken investments with an aggregate acquisition value of €25 billion.

3. WWF has the global insights to help businesses navigate through key sustainability risks and opportunities. As the world’s leading independent conservation organization, we work with businesses, communities and governments to create innovative solutions to safeguard the natural world, tackle climate change and enable the sustainable use of our natural resources. WWF also founded the Finance Innovation Lab, an open environment in which people can come together to explore, innovate and evolve the financial system so that it sustains people and planet: http://thefinancelab.org/

For further information, please contact:

Doughty Hanson & Co
Richard Campbell, Nick Bastin, Nathan Williams, Quintin Keanie (Capital MSL) +44 (0) 207 307 5330, +44 (0) 7775 784 933

WWF-UK
George Smeeton, +44 (0) 1483 412 388, +44 (0) 7917 052 948, gsmeeton@wwf.org.uk