5 Minutes Read By Isabella Calderon Hoyos

Insights from our ESG webinar with carbmee

#Transaction Advisory#Circular economy#CSR
ESG webinar header

We recently conducted a webinar with our partner carbmee, whose enterprise software solution empowers enterprises to manage their value chain carbon management better using automation technology. Its EIS™ is an enterprise software solution for value chain carbon management, specializing in Scope 3 emissions analysis and reduction. The AI-driven technology, combined with LCA precision methodology, enables enterprises to identify their emissions hotspots and make more impactful reduction decisions in days, not years. With Isabella Calderon-Hoyos and carbmee’s Head of Decarbonization Alina Biermann, we delved into the drivers, impact, and value-creation potential of environmental, social, and governance (ESG) in private equity (PE) investments.

 

The vitality of ESG

A recent study by Bain & Company in partnership with EcoVadis found a strong correlation between positive ESG outcomes and strong business performance, outlining the value creation potential of ESG compliance. However, ESG reporting is a relatively new industry which can prove challenging for companies to address effectively, and on top of that, net-zero solutions are perceived as an optional engagement rather than a business lever for competitive advantage and cost saving. But given the emergence of ESG as a key driver for long-term success and value creation, ESG factors have become a crucial consideration for investors across various industries. Some key takeaways for investors from our joint webinar include:

 

Regulatory Drivers

Regulatory changes are reshaping the investment landscape, as there is increasing pressure by regulators for companies to provide detailed disclosure on ESG activities. This can include reporting and tracking to combat greenwashing and provide transparent choices during the investment decision-making process.

 

Opportunities Generated

The increased need for monitoring and compliance due to regulatory changes is just a fraction of the growing importance of ESG considerations. ESG has become quite attractive for PE firms, as it’s shown potential for an array of opportunities that businesses can leverage, including efficiency and cost savings, new revenue streams, enhanced reputation and strengthened business strategy.

ESG as a value-creation driver

ESG has a track record of being a value creation driver across several touchpoints of the deal lifecycle – in addition to maximizing the deal value and enhancing exit readiness, ESG impact and story can mitigate risks and aid in opportunity identification in the due diligence phases.

 

Tech Facilitation of ESG Reporting

Technology plays a crucial role in facilitating ESG reporting within PE portfolios. Currently, the tech landscape is fragmented, necessitating the selection of partners and solutions that align with the firm's business model. Automation is key to making data monitoring more efficient and comparable across different ESG topics. The utilization of artificial intelligence and machine learning enables thorough analysis of ESG performance using analysis and benchmarking.

 

Measuring and Demonstrating Impact

An important step is to establish measurable, time bound ESG goals aligned with the company’s overall mission and values. This helps organizations assess performance and areas for improvement compared to set goals. Additionally, clear communication with stakeholders is vital to ensure that the right metrics are tracked and progress is transparently reported. Open communication channels, along with the strategic use of technology, contribute to effective stakeholder engagement.

As ESG continues to reshape the investment landscape, it is imperative for PE firms to integrate ESG considerations into their investment strategies. The opportunities that arise through ESG initiatives far outweigh the associated risks, making it crucial for PE firms to start investing in ESG sooner rather than later. Firms that are just starting can harness the most out of these initiatives by conducting a status quo analysis and identifying a “north star” to guide their activities, which will ultimately allow them to tackle these benefits in an efficient and streamlined way.

By embracing ESG principles, PE firms can generate not only positive societal impacts but also unlock long-term value creation for their portfolios, which is why we at OMMAX are proud to be building digital leaders and making a positive impact through our partnership with carbmee. Since the topic of ESG is evolving so rapidly, with new regulations and software solutions adding a further layer of complication, services such as ESGvolution can help your organization navigate the complex world of ESG and contribute to a better world. Sustainable digital value creation is key for forward-thinking companies and leading private equity firms transforming their business models for a net-zero future.

To learn more about the topic, please contact OMMAX partner Isabella Calderon-Hoyos.

By Isabella Calderon Hoyos

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