The received wisdom among the private equity community is that, while it has been a mainstay in Europe, a focus on environmental, social and governance issues has yet to gain much traction in the Americas.
But there are encouraging signs this could be about to change. In March, we held our first US-based Responsible Investment Forum. As with our European event bearing the same name – which is set to hold its eighth gathering in a few months’ time – the forum was co-hosted with the United Nations-supported Principles for Responsible Investment.
One delegate observed that the discussion at the Forum’s European counterpart was more philosophical – dwelling on why it was the right thing for the industry as a whole that managers focus on responsible investment – whereas stateside the discussion had a much more practical bent: how can responsible investment boost the performance of portfolio companies, and what is best practice for implementing ESG policies?
Attendees listened with pencils poised as KKR explained how it sought to cut down the cost of cardboard and reduce waste at discount retailer Dollar General, resulting in a saving of several million dollars a year and a reduction in waste, or how Abraaj brought a second truck driver onto the payroll of one of its portfolio companies, resulting in lower turnover and fewer accidents.
Delegates piled into the afternoon workshop on energy and environmental issues – by far the most popular stream – brimming with questions on how best to improve energy efficiency at portfolio companies, and slash their bills in the process.
The UN PRI also announced that it’s planning to get tougher with its signatories; managing director Fiona Reynolds told delegates it plans to delist those that aren’t showing progress towards the responsible investment principles.
The wider market chatter in New York revealed many of the same preoccupations we’re hearing the world over: macro-economic uncertainty coupled with low interest rates and increasing competition leading to sky-high valuations mean it’s hard to get money in the ground.
For the May edition of Private Equity International we sat down with Joe Baratta, a man charged with investing the $20 billion of dry powder that Blackstone has accumulated for buyouts. Baratta voices something that is on the mind of most forward-looking investors: the industry can no longer rely on rising purchase multiples for returns in the way it has in recent years ; any GDP growth prompted by the Trump administration will not translate into strong corporate earnings growth thanks to headwinds coming from higher wages, higher manufacturing costs and the rising cost of debt, he says.
We also listened in on a transatlantic phone call between two veteran fundraisers – Pantheon’s Kevin Albert and BearTooth Advisors’ Bob Brown – to find out their thoughts on a question that has been plaguing the industry for decades: is too much money chasing too few deals?
Be sure not to miss our special report on Japan this month. With dealflow picking up and the potential mega-investors of tomorrow – including GPIF and Japan Post Bank – starting to dip their toes into the private equity pond , it’s an exciting time to be investing in the country. We take a look at the opportunities and challenges and how both local and international GPs are approaching them.
Check in next week to read the magazine in full. In the meantime, we hope you enjoy this preview.