Access to finance
This is essential if vital infrastructure projects are to go ahead. But it’s been an issue throughout the pandemic due to a significant fall in investing.
“The covid-19 pandemic has been affecting economies worldwide, leaving small and medium-sized enterprises particularly vulnerable,” says Rogério Santos, IFC’s head of financial institutions for Brazil and the Southern Cone. He talks of its $100 million of financing to Santander Brasil to help mitigate covid’s impact on the country’s economy: “IFC’s loan will allow Santander Brasil to support small and medium-sized companies, including women-owned businesses, enabling them to continue their business and preserve jobs.”
John Owers, director of African funds and capital partnerships at CDC Group, says: “For new managers it is as hard as it’s ever been [to raise funds]. It’s much easier for managers that have been around a long time, that are used to working through crises.”
The blue economy is a term relating to the exploitation, preservation and regeneration of the marine environment.
More private capital is waking up to the importance of investing in initiatives that protect ocean wildlife.
Witold Marais, investment manager at Mirova, says: “I believe that protecting our environment is the prerequisite to making any kind of infrastructure investment relevant. If our environment collapses, then all the rest becomes useless. In particular, I feel the sustainable use of oceans has been neglected compared to other types of infrastructure assets. At Mirova, we have launched a natural capital investment dedicated to land degradation and sustainable use of oceans.”
Joel Dunn, chief executive of Chesapeake Conservancy, also warns that public financing is not going to be enough to reduce biodiversity loss: “We’ve done the math. We need to increase the pace of conservation.”
By forming alliances, infrastructure firms can help reduce the sector’s impact on climate change more quickly through the sharing of tools and resources.
Zoe Haseman, global head for sustainability and ESG at Jacobs, says: “The focus for net-zero right now is on enabling delivery, and this requires all of us to work together – businesses, governments and communities around the world. The interface with businesses and cross-industry partnerships is vital to informing policy, stimulating innovation, sharing learning and, ultimately, improving action.”
In November 2020, five private markets giants created the One Planet Private Equity Funds group. In a statement, the group said its aim was to “advance the understanding of climate-related risks and opportunities within our investment portfolios so that we can build better and more sustainable businesses”. The move highlights the pressure put on private markets to act fast.
Data security and privacy
Companies are continually looking for ways to use data to offer more personalised and innovative solutions. But this comes with security and privacy risks
Covid-19 has only accelerated security concerns as hackers are becoming more sophisticated and using the pandemic to their advantage.
Megan Starr, global head of impact at Carlyle Group, says: “Businesses are experiencing a rapid transformation in how their customers, employees and suppliers interact. While these changes have unlocked new opportunities, we also believe they have enabled an unprecedented number of cyber threats. We work closely with companies to ensure that effective business continuity plans and data protection programmes are in place. Our experience with cyber threats has also taught us that education is key in the ability to effectively respond to and mitigate the harmful effects of a cyber incident.”
One of the UN’s priorities is to ensure access to affordable, reliable, sustainable and modern energy for all by 2030.
Carmela Mondino, head of ESG and sustainability at Partners Group, says: “The emergence of new solutions to ensure power reliability and flexibility is now one of infrastructure’s key investment themes. As buildings increasingly electrify and electric cars become more prevalent, energy usage patterns are becoming less predictable. This is leading to power grid instability and more damaging power outages.”
Elizabeth Seeger, KKR managing director for sustainable investing, adds: “Companies whose products and services provide solutions facilitating the energy transition will be essential to secure our planet’s health and promote sustainable development, while supplying a product and/or service that is and will continue to be in high demand and critical to our livelihoods.”
Fair trade enables investment in building rural infrastructure, which supports coffee-farming communities and uplifts developing economies.
Many coffee-growing communities are in remote areas, far from basic infrastructure and services.
David Dewez, partner and head of Latin America and the Caribbean at impact investment manager Incofin, says fair trade is a key area of opportunity for investors and a priority for the firm. “Our Fairtrade Access Fund aims to promote the development of a fair and sustainable agriculture sector, availing of a dedicated team with specialist knowledge in each of the 12 different crops, including coffee, cocoa and Brazil nuts, and the regions in which it invests,” he says.
The FAF operates in Latin America, the Caribbean and Africa, offering lending products for agricultural exporters that work primarily with smallholder farms that have a strong commitment to sustainable development.
It is increasingly apparent that this has a positive impact on the financial performance of firms.
According to McKinsey & Co data, companies in the top quartile for diversity and inclusion are 25 percent more likely to have above-average profitability than those in the fourth quartile.
“We believe that a diverse team, with different thinking styles and visions, will bring deeper discussions and more innovative ideas and solutions,” comments Coralie De Maesschalck, head of ESG and CSR at European private debt business Kartesia.
Due to the positive correlation between diversity and business performance, the conversation surrounding gender diversity is getting louder, with firms incorporating inclusion initiatives into their portfolios.
Gurpreet Manku, the British Private Equity & Venture Capital Association’s deputy director general and director of policy, notes: “At a very base level, firms are hiring more women and therefore, as their workforce diversifies, there’s more opportunity for them to progress. More women in senior levels also improves recruitment as it sends a message to applicants that this is a firm [where] they can succeed.”
Abris’s Pawel Gieyrnski also warns that the private markets will suffer if they decide to take a back seat on this. “I believe we need to look at diversity not just as a ‘nice to have’ but as a crucial element of value creation,” he says. “Cognitive bias is a huge issue in private equity and one that can’t be solved by the middle-aged white men who dominate the industry.”
Summa Equity’s head of people, Line Heje Brekke, agrees: “Private equity won’t be successful in attracting and retaining women without shifting from its historical alpha male culture to one that is more inclusive and team-orientated.”
For Summa Equity, hiring criteria are at the forefront of the firm’s mission to be inclusive. “We always try to attract a 50:50 split of male and female employees at associate level,” Brekke says. “And if we have an imbalance, we make sure that our next hire corrects that. It hasn’t been difficult so far because we see a pool of both great male and female candidates.”