ESG KPI report 2023: Managing what you measure

Tackling climate change and standing strong on responsible investment themes, such as diversity and zero tolerance to corruption, are among the greatest challenges – and responsibilities – facing the European private equity and venture capital industry today. These considerations are not only at the forefront of policymakers’ and investors’ minds, but also ever more central to consumers when they decide how to spend their money.

Mindset: Measure to manage and improve

We are firm believers in the saying that you cannot manage – and improve – what you don’t measure. With this in mind, Invest Europe established the ESG Key Performance Indicators (KPIs) study to track fund managers’ contribution to issues such as environmental impact, female participation, and combatting corruption. The aim is to measure the industry’s effort on issues that matter to society and policymakers, and to monitor progress on an annual basis.

ESG workstream and collaboration: Process and data

For this inaugural report, and in parallel to our ESG Reporting Guidelines workstream, we began a process with collaborating National Associations of the European Data Cooperative (EDC) to decide on which metrics to collect. Potential indicators were reviewed, discussed, and surveyed. Metrics considered were based on existing KPIs that GPs are already collecting rather than inventing new ESG metrics. This workstream led to a first data collection for a number of metrics, seen in this report.

We received data from 659 European private equity and venture capital firms on 2,100 funds and 5,895 companies, all relating to ESG KPIs in 2021. Our findings show that 77% of firms for which data was received had ESG investment and portfolio management processes in place, including 90% of buyout firm respondents, demonstrating the clear and established focus on ESG throughout the industry.

Walk the walk: Industry efforts lead to meaningful outcome and real impact

Our research goes deeper to show the practical efforts being made by managers and their real impact. Across all companies in our study, 31% had an Environmental Management System in place, with the majority of those responding stating they were externally certified. We can see that 9% of companies had already made the commitment to ‘net zero’, with those in the energy and environment sector doubling that percentage. The data also shows that – on average – 38% of full-time equivalent roles in private equity and venture capital backed businesses were held by women – a figure that was similar across all investment stages and regions.

Our ESG journey, the road ahead

Every journey starts with a decisive step. Invest Europe’s ESG KPI Report is an ambitious project and clearly demands time and effort from firms. We recognise there is more to do, and expect participation in our study to increase over time as more managers become involved. Given submission levels, this first year of data collection cannot be considered as representative of the PE&VC industry as a whole.

Yet, we also see the promise as private equity and venture capital managers establish policies to deliver and measure ESG results while also making firm commitments to addressing climate change. The direction of travel is already clearly defined. In time, ESG measurement and reporting will be as routine as tracking financial metrics.

Portfolio company level data

Environment

Social

Governance

Firm & fund level data

Firm & fund level data

Statistical universe

We received data from 659 European private equity and venture capital firms on 2,100 funds and 5,895 companies, all relating to ESG KPIs in 2021. Given submission levels, this first year of data collection cannot be considered as representative of the PE&VC industry as a whole. Figures presented throughout the report are the results received of those that answered the survey, sample sizes are given throughout for clarity.

Overview of data collected

Headquarters of entities for which data was received

Focus/stage of entities for which data was received

Methodology

This inaugural ESG report from Invest Europe is the result of a process which began in early 2021. Recognising the need for the European Private Equity & Venture Capital industry to be able to describe its work on ESG, collaborating National Associations of the European Data Cooperative (EDC) began a process with Invest Europe which led to a first data collection on several metrics at firm, fund, and portfolio company level.

The process of selecting metrics involved a review of all current metrics in the space. Furthermore, discussions with GPs already well advanced on their ESG journey, meetings with service providers working with the industry, as well as an extensive survey to GPs were carried out. We surveyed about the extent to which they collect – or else in the future will look to collect – specific metrics from their portfolio companies.

Importantly, rather than inventing new ESG metrics, this initiative bases its work on existing KPIs which GPs are already collecting from their portfolio companies.

All data was collected from GPs through the European Data Cooperative. It is important to note that – given submission levels – this first year of data collection cannot be considered as representative of the PE&VC industry as a whole. Figures presented throughout the report are the results received of those that answered the survey, sample sizes are given throughout for clarity.

The report includes data

only of portfolio companies with European¹ headquarters and
only European companies active during 2021 within the portfolio of a private equity investor had data collected i.e., companies exited prior to 2021 or backed post-2021 were excluded.

Similarly, the report includes

only the funds with advisory teams located in Europe and
funds active during 2021 (i.e., funds terminated prior to 2021 or launched post-2021 were excluded).

To ensure data correctness, consistency checks were performed on the data. Inconsistent data reported by co-investors was confirmed with public sources, if possible. In the cases where public sources were not available, the reporting value was taken from the GP with the most complete set of answers, in all cases with information being reviewed manually by analysts. For multiple answers submitted regarding the sustainable investment fund categorisation, the highest reported category was taken. For example, if a GP had answered their fund was Article 6 & 9, the fund was categorised as Article 9.

1.Europe includes: Austria, Andorra, Belgium, Bosnia-Herzegovina, Bulgaria, Channel Islands, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, Ireland, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Moldova, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Ukraine, United Kingdom, Vatican City.

Acknowledgements

We are grateful for the generous support of General Partners representing private equity and venture capital firms across Europe who provided us with their data. These pan-European statistics would not be possible without their commitment.

We also thank all the regional and national private equity associations formally partnering with Invest Europe as part of the European Data Cooperative (EDC).

Further thanks go to Astanor Ventures, EQT, IK Partners, Investindustrial, and TowerBrook Capital Partners for their insightful success stories.

The Invest Europe Research team is supported by PEREP Analytics.

PEREP Analytics

Statistics Manager

Iuliana Furica

Statistics Leads

Adriana Suket (Craciun)
Alexandra Ehupov
Cristina Porumboiu, Report Dedicated Lead

Statistics Team

Alexandra Bogomazova, Report Dedicated Analyst
Alexandra Ionescu
Andreea Anca
Angela Sapun-Cucu, Report Dedicated Analyst
Bianca Ostropet
Dragos Tanasescu
George Radulescu
Luiza Dima
Renata Sandulache
Silvia Costea
Tiberiu Mihailescu
Valentin Lepadat

Success stories: In the spotlight

We are delighted to showcase the firm and portfolio company contributions that highlight data submitted for the ESG KPI Report – part of the first mover contributions to our work.