Although the pendulum on sustainability continues to swing, investors are maintaining an optimistic, future-forward outlook on sustainability’s positioning and importance in private equity. On day two of Novata’s Resilience Roundtable in London, investors and sustainability professionals from across the private markets heard speakers discuss sustainability’s business impact and its influence on the bottom line. Key conversations revolved around long-term investment resilience, the need for an agile approach amidst market fluctuations, and sustainability as a lever of value creation.
Check out the key insights from our session:
- Demonstrating how sustainability results in tangible business value remains a critical priority for investors to maintain the momentum of existing initiatives amid renewed scrutiny and political setbacks. Measuring the ROI of sustainability goes beyond fiscal benefits. Research from McKinsey found that diverse, inclusive executive teams led to improved innovation, business growth, and financial performance, while energy-saving policies are a quick win for accelerating decarbonization targets and boosting the bottom line.
- In impact investing, the growing pool of undeployed capital in impact funds raises important questions about impact investment opportunities, or lack thereof. Speakers also remarked that the definition of an impact investment will expand; although additionality will remain a core principle, investors are now looking to channel capital toward established markets like renewable energy and social infrastructure. However, this could dilute the purpose of impact investing and lead to investors conflating impact investments and market-driven sustainable investments.
- Not all sustainability data is created equal; data that is collected and analyzed for regulatory disclosures may not be relevant from an investment perspective. However, private equity firms can still uncover actionable insights from material data to monitor their sustainability progression and transition risks, as well as identify future opportunities for competitive differentiation and business resilience.
- Younger generations, such as Millennials and Generation Z, are leading the charge toward a sustainable future. The changing demographic of investors and the workforce at large has catalyzed a significant shift toward sustainable investing, and this advocacy has cascaded down to demands for fair wages, ethical supply chains, and sustainable business practices.
- Burnout is a growing concern for sustainability professionals. Cognitive switching, or the need to constantly shift focus between multiple disciplines—compounded with heavy workloads—can be a strain on mental health. Outsourcing certain responsibilities, such as regulatory reporting, to third-party experts can alleviate these burdens and enable specialized sustainability teams to focus on strategic, high-value tasks instead.
- Investors will need to push for fiduciary clarity to safeguard sustainable investments from being misconstrued as having no financial importance. This is in parallel with corporate sustainability efforts being scaled back or curtailed; incentives, collective action and internal advocacy are a must to continue showcasing how sustainability is key to long-term financial and business resilience.
The conversations at this Resilience Roundtable confirmed what forward-thinking investors already know—sustainability drives enhanced business resilience and financial performance. As the markets continue to evolve, businesses and investors that remain steadfast in their commitment to sustainability will be able to thrive in the years ahead.
Novata has the platform and expert advisory investors need to navigate the complex sustainability landscape with confidence and clarity. Learn how we can help you to turn uncertainty into opportunities for value creation today.
- Read insights from day one of our Resilience Roundtable.
- Request a demo of our purpose-built sustainability platform for the private markets today.
- Join us at upcoming events and conferences near you.
