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Impact investing study in the Private Equity Field
Impact business Afternoon
May 23th, 2017, Helsinki
© 2017 Deloitte & Touche Oy, Group of Companies. 2
Collaborative study
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 3
“IMPACT INVESTING IS AN
INVESTMENT APPROACH THAT
INTENTIONALLY SEEKS TO CREATE
BOTH FINANCIAL RETURN AND
POSITIVE SOCIAL OR ENVIRONMENTAL
IMPACT THAT IS ACTIVELY MEASURED.”
ENVIRONMENTAL THEMES:
Intentionality
matters
Targets
financial
returns
Targets
environmental
or social impact
Outcomes
are actively
measured
0301 02 04
• Renewable energy
• Resource and energy efficiency
• Climate change
• Water and air quality
• Circular economy
• Health and wellbeing
• Education
• Affordable housing
• Financial inclusion
• Food security
SOCIAL THEMES:
Examples of impact themes:
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 4
1.DEMAND? 3.FUTURE?
”What do institutional
investors think about
impact investing?”
“What is the current state of
ESG maturity and the role of
impact for the Private equity
investors?”
”What can be said about
the future of impact
investing in the Private
equity field?”
3
OBJECTIVES:
2.CURRENT STATE?
4
STEPS:
INSTITUTIONAL INVESTORS
INTERVIEWS
SURVEY FOR PEs PE INTERVIEWS FINAL REPORT
18
7,2605
55
Institutional
investor interviews
Answers to
survey
Number of portfolio
companies
Billion euros
invested
Private equity
interviews
Impact investing
study:
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 5
Framework for responsible investing
ESG risks
ESG
opportunities
ESG
integration
Thematic
investments
Impact investing
Return & risk Return, risk & impact
Increased measuring, reporting and transparency
FOOTPRINT
• Emissions
• Human rights
• Governance
HANDPRINT
• Cleantech
• Sustainable
development
• Health and
wellbeing
Impact investing
and thematic
investments bring a
third dimension
next to return and
risk.
The focus is on
solving
environmental and
social problems.
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 6
Footprint-Handprint matrixESG
Low
Low
HighImpact
High
IMPACT WITH RESPONSIBILITY
(FOOTPRINT + HANDPRINT)
IMPACT EXPERT
(HANDPRINT)
ESG EXPERT
(FOOTPRINT)
BEGINNER IN THE JOURNEY OF
RESPONSIBILITY
Based on the current
state of ESG maturity
and the role of
impact, actors can be
divided into four
categories.
Moving to the right
upper corner =
Footprint + Handprint
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 7
DEMAND?
Institutional investors
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 8
Institutional investors have systematically built their
practices around ESG
Reporting
requirements
Continuous
dialogue
between LP &
GP
(+advisory
committees)
?
2 3 4
Side letters &
ESG
principles
1
Institutional
investors expect
Private equity
investors to
proactively develop
their ESG practices
and communicate
on their efforts.
Development of ESG practices between Institutional
investors and Private equity investors:
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 9
“The portfolios of Private Equity
investors ALREADY INCLUDE LOTS OF
IMPACT”
Cleantech, circular economy, health and
wellbeing…
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 10
Impact investing?
The impact investing
ecosystem is still at
the early stage.
Institutional
investors are
familiar with impact
investing and they
are following closely
its development as
well as building their
own approaches to
impact investing.
Institutional investor interviews - Key findings:
• The broader change in society is driving the growth of impact investing
• Financial return and impact can go hand in hand – financial returns can not be
sacrificed
• Current ESG practices among the Private equity investors form a solid base for the
development of impact investing
• Impact can be used as a tool to identify future proof business opportunities
(Thematic investments, UN Sustainable Development Goals)
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 11
CURRENT STATE?
Private equity investors
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 12
ESG and impact maturity in the Private equity fieldESG
Low
Low
HighImpact
High
The transition to right
upper corner happens
through the
development of ESG
practices.
Responsible investing
and ESG practices
have been already
integrated as a core
part of Private equity
investors’ business.
= PE = PE average = Institutional investor average
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 13
Responsibility is a core part of
Private equity investors’ business
72,2 %
Responsible investing can be
seen as a basic requirement.
01
02
61,1 %
50,0 %
33,3 %
11,1 %
ESG is important
from the value
creation point of
view
ESG creates
opportunities for
us
Our ESG focus is
mostly on risk
management
ESG does not
bring any value for
us
How do you see the role of ESG in your business?
However, the role of ESG measuring
is still at the moderate level
41,2
%
We haven’t build practices to
measure and monitor ESG.
ESG has also role in developing
portfolio companies and in exit
03
04
61,1
%
We consider ESG related opportunities
in developing portfolio companies.
38,9
%
We try to build an interesting
investment story from the ESG
point of view for our investments.
The focus of ESG has moved from
risk management to opportunities
ESG-FOOTPRINT
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 14
Impact investing as a term is
familiar to respondents
17,6
%
I don’t know the term impact
Investing/I have a weak understanding.
01
02
Thematic investments are seen as
interesting opportunities
However, impact is not yet
visible in the PEs’ strategies
03
04
44,4
%
Impact does not have a role in our
investment strategy.
Investments are approached
primarily from return perspective,
but impact is also present
72,2 %
We seek also impact, but
return is the first target.
11,1
%
We target only return.
vs.
52,9
%
Thematic investments, targeting
environmental and social impact,
provide interesting investment
opportunities.
IMPACT-HANDPRINT
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 15
“We can target impact by investing in
INNOVATIVE COMPANIES THAT
CHANGE THE WORLD”
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 16
FUTURE?
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 17
Challenges?
16,7 %
50,0 %
83,3 %
22,2 %
55,6 %
Lack of investment opportunities
Immaturity of ecosystem
Impact measurement
Knowledge and skills
Understanding the relationship between impact and return
What you consider to be the biggest challenges
for the growth of impact investing?
”There is enough
information available,
but concrete procedures
are missing or they are
still emerging.”
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 18
Future outlook?
5,60%
38,90%
27,80% 27,80%
No Maybe Yes I don't know
Are you going to consider impact in the next fund?
Only 5,6 percent of
respondents say that
they are not going to
consider impact in the
next fund.
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 19
KEY FINDINGS and
RECOMMENDATIONS
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 20
01 ESG has a central and integrated role in the PE’s business –
the focus has moved from risks to opportunities.
02 ESG forms a solid base for the growth of impact investing in
the PE field.
03 Impact can be seen as a tool to identify future-proof long
term business opportunities.
04
05
06
Institutional investors see that PE firms have lots of impact in
their current portfolios – currently this impact is not utilized.
There is both demand and potential supply for impact investing
in the PE field, but currently they don’t encounter.
The most important driver for the growth of impact investing,
is seen to be the interest of institutional investors.
KEY FINDINGS:
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 21
RECOMMENDATIONS:01 Current portfolios: Identify the impact in the current portfolios
and utilize it more effectively.
02 Proactive communication: Bring impact visible and
communicate it to LPs.
03 Future-proof business: Focusing on the handprint can help to
understand, which themes will be the most important in the future.
04
05
06
Bring impact to strategy: Include impact in the investment
strategy and use it as a part of the investment stories.
Common language: Building a common language and dialogue
between LPs and GPs is vital for the development of impact
investing.
Need for pioneers: Ecosystem is still at the early stage and
someone needs to be first.
A collaborative study by FVCA, Sitra and Deloitte
© 2017 Deloitte & Touche Oy, Group of Companies. 22
Collaborative study
Riikka Poukka
Leader,
Sustainability Services
riikka.poukka@deloitte.fi
+358 50 5758217
THANK YOU!
A collaborative study by FVCA, Sitra and Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member
firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as
“Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member
firms.
In Finland, Deloitte & Touche Oy is the member firm of Deloitte Touche Tohmatsu Limited, and services are provided by Deloitte & Touche Oy and
its subsidiaries. In Finland Deloitte is among the nation’s leading professional services firms, providing audit, tax, legal, consulting, and financial
advisory services through 450 people in 3 cities. Known as an employer of choice for innovative human resources programs, Deloitte is dedicated
to helping its clients and its people excel. For more information, please visit our website at www.deloitte.fi.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities
(collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte
network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.
© 2017 Deloitte & Touche Oy, Group of Companies.

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Impact investing study in the private equity field

  • 1. Impact investing study in the Private Equity Field Impact business Afternoon May 23th, 2017, Helsinki
  • 2. © 2017 Deloitte & Touche Oy, Group of Companies. 2 Collaborative study A collaborative study by FVCA, Sitra and Deloitte
  • 3. © 2017 Deloitte & Touche Oy, Group of Companies. 3 “IMPACT INVESTING IS AN INVESTMENT APPROACH THAT INTENTIONALLY SEEKS TO CREATE BOTH FINANCIAL RETURN AND POSITIVE SOCIAL OR ENVIRONMENTAL IMPACT THAT IS ACTIVELY MEASURED.” ENVIRONMENTAL THEMES: Intentionality matters Targets financial returns Targets environmental or social impact Outcomes are actively measured 0301 02 04 • Renewable energy • Resource and energy efficiency • Climate change • Water and air quality • Circular economy • Health and wellbeing • Education • Affordable housing • Financial inclusion • Food security SOCIAL THEMES: Examples of impact themes: A collaborative study by FVCA, Sitra and Deloitte
  • 4. © 2017 Deloitte & Touche Oy, Group of Companies. 4 1.DEMAND? 3.FUTURE? ”What do institutional investors think about impact investing?” “What is the current state of ESG maturity and the role of impact for the Private equity investors?” ”What can be said about the future of impact investing in the Private equity field?” 3 OBJECTIVES: 2.CURRENT STATE? 4 STEPS: INSTITUTIONAL INVESTORS INTERVIEWS SURVEY FOR PEs PE INTERVIEWS FINAL REPORT 18 7,2605 55 Institutional investor interviews Answers to survey Number of portfolio companies Billion euros invested Private equity interviews Impact investing study: A collaborative study by FVCA, Sitra and Deloitte
  • 5. © 2017 Deloitte & Touche Oy, Group of Companies. 5 Framework for responsible investing ESG risks ESG opportunities ESG integration Thematic investments Impact investing Return & risk Return, risk & impact Increased measuring, reporting and transparency FOOTPRINT • Emissions • Human rights • Governance HANDPRINT • Cleantech • Sustainable development • Health and wellbeing Impact investing and thematic investments bring a third dimension next to return and risk. The focus is on solving environmental and social problems. A collaborative study by FVCA, Sitra and Deloitte
  • 6. © 2017 Deloitte & Touche Oy, Group of Companies. 6 Footprint-Handprint matrixESG Low Low HighImpact High IMPACT WITH RESPONSIBILITY (FOOTPRINT + HANDPRINT) IMPACT EXPERT (HANDPRINT) ESG EXPERT (FOOTPRINT) BEGINNER IN THE JOURNEY OF RESPONSIBILITY Based on the current state of ESG maturity and the role of impact, actors can be divided into four categories. Moving to the right upper corner = Footprint + Handprint A collaborative study by FVCA, Sitra and Deloitte
  • 7. © 2017 Deloitte & Touche Oy, Group of Companies. 7 DEMAND? Institutional investors A collaborative study by FVCA, Sitra and Deloitte
  • 8. © 2017 Deloitte & Touche Oy, Group of Companies. 8 Institutional investors have systematically built their practices around ESG Reporting requirements Continuous dialogue between LP & GP (+advisory committees) ? 2 3 4 Side letters & ESG principles 1 Institutional investors expect Private equity investors to proactively develop their ESG practices and communicate on their efforts. Development of ESG practices between Institutional investors and Private equity investors: A collaborative study by FVCA, Sitra and Deloitte
  • 9. © 2017 Deloitte & Touche Oy, Group of Companies. 9 “The portfolios of Private Equity investors ALREADY INCLUDE LOTS OF IMPACT” Cleantech, circular economy, health and wellbeing… A collaborative study by FVCA, Sitra and Deloitte
  • 10. © 2017 Deloitte & Touche Oy, Group of Companies. 10 Impact investing? The impact investing ecosystem is still at the early stage. Institutional investors are familiar with impact investing and they are following closely its development as well as building their own approaches to impact investing. Institutional investor interviews - Key findings: • The broader change in society is driving the growth of impact investing • Financial return and impact can go hand in hand – financial returns can not be sacrificed • Current ESG practices among the Private equity investors form a solid base for the development of impact investing • Impact can be used as a tool to identify future proof business opportunities (Thematic investments, UN Sustainable Development Goals) A collaborative study by FVCA, Sitra and Deloitte
  • 11. © 2017 Deloitte & Touche Oy, Group of Companies. 11 CURRENT STATE? Private equity investors A collaborative study by FVCA, Sitra and Deloitte
  • 12. © 2017 Deloitte & Touche Oy, Group of Companies. 12 ESG and impact maturity in the Private equity fieldESG Low Low HighImpact High The transition to right upper corner happens through the development of ESG practices. Responsible investing and ESG practices have been already integrated as a core part of Private equity investors’ business. = PE = PE average = Institutional investor average A collaborative study by FVCA, Sitra and Deloitte
  • 13. © 2017 Deloitte & Touche Oy, Group of Companies. 13 Responsibility is a core part of Private equity investors’ business 72,2 % Responsible investing can be seen as a basic requirement. 01 02 61,1 % 50,0 % 33,3 % 11,1 % ESG is important from the value creation point of view ESG creates opportunities for us Our ESG focus is mostly on risk management ESG does not bring any value for us How do you see the role of ESG in your business? However, the role of ESG measuring is still at the moderate level 41,2 % We haven’t build practices to measure and monitor ESG. ESG has also role in developing portfolio companies and in exit 03 04 61,1 % We consider ESG related opportunities in developing portfolio companies. 38,9 % We try to build an interesting investment story from the ESG point of view for our investments. The focus of ESG has moved from risk management to opportunities ESG-FOOTPRINT A collaborative study by FVCA, Sitra and Deloitte
  • 14. © 2017 Deloitte & Touche Oy, Group of Companies. 14 Impact investing as a term is familiar to respondents 17,6 % I don’t know the term impact Investing/I have a weak understanding. 01 02 Thematic investments are seen as interesting opportunities However, impact is not yet visible in the PEs’ strategies 03 04 44,4 % Impact does not have a role in our investment strategy. Investments are approached primarily from return perspective, but impact is also present 72,2 % We seek also impact, but return is the first target. 11,1 % We target only return. vs. 52,9 % Thematic investments, targeting environmental and social impact, provide interesting investment opportunities. IMPACT-HANDPRINT A collaborative study by FVCA, Sitra and Deloitte
  • 15. © 2017 Deloitte & Touche Oy, Group of Companies. 15 “We can target impact by investing in INNOVATIVE COMPANIES THAT CHANGE THE WORLD” A collaborative study by FVCA, Sitra and Deloitte
  • 16. © 2017 Deloitte & Touche Oy, Group of Companies. 16 FUTURE? A collaborative study by FVCA, Sitra and Deloitte
  • 17. © 2017 Deloitte & Touche Oy, Group of Companies. 17 Challenges? 16,7 % 50,0 % 83,3 % 22,2 % 55,6 % Lack of investment opportunities Immaturity of ecosystem Impact measurement Knowledge and skills Understanding the relationship between impact and return What you consider to be the biggest challenges for the growth of impact investing? ”There is enough information available, but concrete procedures are missing or they are still emerging.” A collaborative study by FVCA, Sitra and Deloitte
  • 18. © 2017 Deloitte & Touche Oy, Group of Companies. 18 Future outlook? 5,60% 38,90% 27,80% 27,80% No Maybe Yes I don't know Are you going to consider impact in the next fund? Only 5,6 percent of respondents say that they are not going to consider impact in the next fund. A collaborative study by FVCA, Sitra and Deloitte
  • 19. © 2017 Deloitte & Touche Oy, Group of Companies. 19 KEY FINDINGS and RECOMMENDATIONS A collaborative study by FVCA, Sitra and Deloitte
  • 20. © 2017 Deloitte & Touche Oy, Group of Companies. 20 01 ESG has a central and integrated role in the PE’s business – the focus has moved from risks to opportunities. 02 ESG forms a solid base for the growth of impact investing in the PE field. 03 Impact can be seen as a tool to identify future-proof long term business opportunities. 04 05 06 Institutional investors see that PE firms have lots of impact in their current portfolios – currently this impact is not utilized. There is both demand and potential supply for impact investing in the PE field, but currently they don’t encounter. The most important driver for the growth of impact investing, is seen to be the interest of institutional investors. KEY FINDINGS: A collaborative study by FVCA, Sitra and Deloitte
  • 21. © 2017 Deloitte & Touche Oy, Group of Companies. 21 RECOMMENDATIONS:01 Current portfolios: Identify the impact in the current portfolios and utilize it more effectively. 02 Proactive communication: Bring impact visible and communicate it to LPs. 03 Future-proof business: Focusing on the handprint can help to understand, which themes will be the most important in the future. 04 05 06 Bring impact to strategy: Include impact in the investment strategy and use it as a part of the investment stories. Common language: Building a common language and dialogue between LPs and GPs is vital for the development of impact investing. Need for pioneers: Ecosystem is still at the early stage and someone needs to be first. A collaborative study by FVCA, Sitra and Deloitte
  • 22. © 2017 Deloitte & Touche Oy, Group of Companies. 22 Collaborative study Riikka Poukka Leader, Sustainability Services riikka.poukka@deloitte.fi +358 50 5758217 THANK YOU! A collaborative study by FVCA, Sitra and Deloitte
  • 23. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. In Finland, Deloitte & Touche Oy is the member firm of Deloitte Touche Tohmatsu Limited, and services are provided by Deloitte & Touche Oy and its subsidiaries. In Finland Deloitte is among the nation’s leading professional services firms, providing audit, tax, legal, consulting, and financial advisory services through 450 people in 3 cities. Known as an employer of choice for innovative human resources programs, Deloitte is dedicated to helping its clients and its people excel. For more information, please visit our website at www.deloitte.fi. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication. © 2017 Deloitte & Touche Oy, Group of Companies.