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.
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 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.