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Ardian

PRI reporting framework 2017

You are in Direct – Private Equity » Outputs and outcomes

Outputs and outcomes

PE 16. ESG issues affected financial/ESG performance

New selection options have been added to this indicator. Please review your prefilled responses carefully.

16.1. Indicate whether your organisation measures how your approach to responsible investment in Private Equity investments has affected financial and/or ESG performance.

Describe the impact on:
Impact
Financial performance of investments
Describe the impact on:
Impact
ESG performance of investments

16.2. Describe how you are able to determine these outcomes.

It has always been important for us to develop ways to measure and benchmark our results. Over the past few years we have done a lot of pioneering work with the management of companies in our Direct Funds portfolios that is now allowing us put hard numbers on the results we are achieving.

Financial impact

For several portfolio companies, Ardian measured the financial impact of specific ESG initiatives on sales and profitability. Impact was significant and further discussed with management teams as part of Ardian's effort to improve ESG practices of its portfolio companies.

For example, companies such as Novacap and Fives have shown big benefits from specific sustainability initiatives. They are both industrial companies that afford quite complex conditions in which to apply  sustainability principles, with multiple areas to monitor and address, operations in a wide range of countries with different laws and guidelines, and so on.

- At Fives for instance, Ardian assessed the costs linked to voluntary departures that were avoided as a result of the company’s initiatives and concluded that savings in 2014 amounted to more than €400,000, demonstrating a strong link between improvements in ESG policies and value creation. We also assessed the results of the company’s “Eco-design” program, which consisted of six products carrying the label “Engineered Sustainability”. This generated revenues of more than €48m in 2015, establishing again the link between between ESG policies and value creation.
- At Novacap, a program to reduce accidents at workacross company facilities resulted in a reduction of 75% of the  accident frequency rate during Ardian's ownership from 2011 to 2016. Over the same period, the company’s headcount tripled, from 500 to 1,600. The reduction in working hours lost due  to accidents represented a major improvement  in employee working conditions and produced cost savings worth more than €500,000 per year.

ESG impact

ESG reviews allow Ardian's teams to assess the impact of their activities and engagement practices on portfolio companies' ESG performance. In the case of companies for which successive ESG reviews have been conducted, Ardian's teams use a number of Key Performance Indicators to monitor improvements in their ESG performances.


PE 17. Examples of ESG issues that affected your PE investments

New selection options have been added to this indicator. Please review your prefilled responses carefully.

17.1. Provide examples of ESG issues that you identified in your potential and/or existing private equity investments during the reporting year.

Investment Stage
ESG issues

ESG issues

          Risk management
        
Sector(s)
          Industry
        
Impact (or potential impact) on the investment

Risk management

Activities undertaken to influence the investment and its response

Several companies implemented Environmental management system with ISO 14001 certification.

Investment Stage
ESG issues

ESG issues

          Pollution risk
        
Sector(s)
          Industry
        
Impact (or potential impact) on investment

Pollution risk

Activities undertaken to influence the investment and its response

New investments to secure environmental externalities and circumvent pollutions risks.

 

Investment Stage
ESG issues

ESG issues

          Employees' satisfaction and commitment.

Attractiveness and long term development of the firm.
        
Sector(s)
          Service
        
Impact (or potential impact) on investment

Employees' satisfaction and commitment.

Attractiveness and long term development of the firm.

Activities undertaken to influence the investment and its response

Integrate geographic parameters (proximity with family) when assigning “on-the-road missions” to consultants.

Investment Stage
ESG issues

ESG issues

          Employees' satisfaction and commitment
        
Sector(s)
          Industry
        
Impact (or potential impact) on investment

Employees' satisfaction and commitment

Activities undertaken to influence the investment and its response

Value created at the exit was shared with all employees: in 2016 over 400 employees from three portfolio companies received the equivalent of one to two months salary.

Investment Stage
ESG issues

ESG issues

          Operational risks and long term development of the firm.
        
Sector(s)
          Service
        
Impact (or potential impact) on investment

Operational risks and long term development of the firm.

Activities undertaken to influence the investment and its response

Appoint internationally renowned industry specialists as independent Board members.

17.2. Describe how you define and evaluate the materiality of ESG factors.

A summary of the ESG analysis conducted during the due diligence phase is included in every Investment Memorandum submitted to the investment committee. If material ESG risks are identified, a corrective action plan is included in the post-acquisition plan.

Then, throughout the investment period, the investment team maintains a constant dialogue with the portfolio company’s management teams and actively monitors the evolution of their ESG practices. They do it both directly, and with the support of dedicated external consultants who regularly carry out ESG reviews. ESG reviews serve as a basis for the establishment of recommendations and goals with concrete actions plans to help portfolio companies to improve their ESG performance.

To structure the collection and analysis of extra-financial indicators during the holding period, Ardian has developed an ESG framework.


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