Sustainable Buyout: Ardian reveals its new and exclusive Sustainability Measurement Methodology

This objective, expressed by Philippe Poletti, member of the Executive Committee and Head of Ardian Buyout, draws on thinking about how to take Ardian to the next level in terms of its commitment to Sustainability – and takes the form of the Sustainable Buyout.

Identifying and supporting the companies of the future

Over the past decade, Ardian has incorporated sustainability at the core of company transformation in order to shape high-performing and resilient business models providing measurable impacts on society and the planet. More recently, health and social events have only served to reinforce this belief. As a leading investor, Ardian is in a position to support the companies of the future.

“With this goal in mind, we are sharing our Sustainable Buyout investment approach to support the emergence and progress of tomorrow’s companies,” highlights Philippe Poletti. “These are the firms that will help to build a world that is more attuned to environmental and social issues; firms that will ensure that sustainability aspirations are not empty words but a tangible new reality lived and shared by everyone.”

The typical features of Buyout include an average holding period of between 3 and 7 years, generally as the majority shareholder, along with a presence and level of support for business leaders that is both tailored to their needs and close to everyday business realities: the ideal environment for experimenting and developing the renewed approach of the Sustainable Buyout. “The Buyout segment has been at the heart of our sustainability approach for years,” says Philippe Poletti. “We first began trialing ESG reviews in this portfolio back in 2009. Those tests were successful and went down well with management teams, who were also part of the assessments.”

A methodology for measuring impact

For the past ten years we have been measuring and monitoring portfolio companies most material ESG indicators but these were largely focused on the companies’ operations and industry benchmarks.

Ardian’s renewed methodology goes beyond standard ESG integration to include the full value chain of the company, providing the team with a measurable assessment of each company’s full societal impact as well as potential areas for improvement. It combines a sector agnostic absolute score capturing real impact produced, with a relative score quantifying the sustainable performance within an industry, helping Ardian measure and maximize the potential for change of a broad range of companies.

“To keep moving forward, we have to constantly innovate and ensure our tools enable us to measure progress. What gets measured, gets done!” declared Philippe Poletti. Holistic, universal and rigorous, this methodology takes into account the impacts, both positive and negative, of a company’s own value chain – along with those of its suppliers – and its products and services. At the same time, the areas of improvement are also identified. For example, for one of our portfolio companies, Solina, the new methodology broadened the scope of the action plan which historically focused on purchasing plan without taking into account the full impact of its products on customers health.

“The idea is to have a framework within which to conduct detailed quantitative and qualitative company analyses,” explains Candice Brenet, Head of Sustainability. “Our methodology echoes the way that we have always approached investing. By that I mean that it is a very human business, grounded in an individual analysis of the company and combined with discipline and real ambition.”

The methodology was designed by drawing on internationally-recognized frameworks and initiatives, notably the theory of change, the Impact Management Project and the United Nations Sustainable Development Goals.

A new segment of Responsible Investing

The Sustainable Buyout has been developed as a bridge between funds which actively integrate ESG criteria and impact funds.
 
The approach is focused on companies’ ability to transform themselves into more sustainable and more resilient businesses, which includes the ability to improve their positive impact while also reducing their negative impact. This potential for improvement is precisely what Ardian seeks to encourage, as Philippe Poletti emphasizes: “Growing numbers of companies are focusing on extra-financial aspects as they seek to better their performances and enhance their reputations. As Buyout investors and leaders of the industry, we have a key role to play in this new era by supporting company executives and their people throughout the entire investment cycle.”

The next steps

At the heart of Ardian’s Buyout portfolio, the methodology is not only a way of measuring every company’s impact, but has also proven to be the perfect tool for including teams and stakeholders in a broader awareness-raising about sustainability.

In addition, this approach is designed to enrich people’s thinking about Responsible Investing, beyond the Buyout, as Candice Brenet explains: “The short-term goal is to test the methodology out in other portfolios, but our long term ambition is to use this tool extensively across our investments to better monitor and scale Ardian’s positive impact”.

Read the full study