International private equity firm, Cinven, today sets out its climate-related commitments and underlines its strategic focus on working towards decarbonising its own operations and portfolio businesses to coincide with the 26th United Nations Climate Change Conference, COP26, in Glasgow.
- Portfolio greenhouse gas (GHG) emissions – Cinven has been monitoring GHG emissions data from its portfolio companies on a quarterly basis since 2015 as one of the mandatory ESG KPIs it requires its portfolio companies to report on, to track carbon intensity. This data is now being used to inform Cinven’s approach to target setting aligned with the Paris Agreement.
- Carbon footprinting and net zero targets – Cinven has recently appointed an external advisor to undertake a comprehensive carbon footprinting exercise of its own operations and the financed emissions associated with its portfolio. Cinven is working towards setting a net zero target in 2022.
- Portfolio climate net zero commitments – Several of Cinven’s 30 portfolio companies have set targets to reduce GHG emissions and are already making significant progress on these. Selected examples include:
- Masmovil, one of the largest telecommunications operators in Spain, announced in May 2021 that it had become the first telecommunications operator in Europe to achieve zero net carbon emissions, having reached the milestone in 2020. In 2020, it became the first major telecommunications operator to launch a 100% green electricity service; and in September 2021, Masmovil was the first telecommunication operator in Europe to become a B-Corp certified company which include commitments to the highest social and environmental performance.
- Hotelbeds, the world’s leading bed bank, became the first B2B travel company, in February 2021, to join The Climate Pledge Commitment to reach net zero emissions by 2040; and in 2020, Hotelbeds launched its Green Hotels programme to identify, highlight and promote sustainable accommodation within its hotel portfolio.
- TK Elevator, a leading international provider of elevators and escalators has joined Business Ambition For 1.5°C committing to set a target in line with a 1.5C and net-zero future and is developing ambitious science-based emissions reduction targets (SBTs). It has also committed to all electricity required by the business to come from renewable sources by 2030. In 2021, the company was one of 277 companies worldwide included in the CDP climate change A List; and it has committed to help increase resource efficiency and improve CO2 emissions through innovative products and services such as elevators and escalators with the highest efficiency ratings.
- Envirotainer, a global leader in the secure cold chain solutions for air transport of pharmaceuticals became the first company in its industry to become carbon neutral for scope 1, 2 and 3 emissions in 2020; and a life cycle analysis of pharmaceutical shipment solutions demonstrated Envirotainer’s to be the most carbon efficient in its industry.
- Assessing climate-related financial risks and opportunities to drive sustainable transformation – Cinven undertakes an assessment of climate-related risk and opportunity for each of its portfolio companies, aligned to the recommendations of the Taskforce on Climate- related Financial Disclosures (‘TCFD’). In 2019, Cinven appointed an external expert to undertake a TCFD-aligned analysis of its entire portfolio. Since then, a TCFD-related assessment is undertaken of all new Cinven portfolio companies to help them understand the current and future potential climate-related risks, and opportunities, which could affect the financial performance of these businesses. Where climate-related opportunities are identified, these are actively explored with management teams and built into value creation plans.
- Embedding ESG into operational improvement and value creation – Cinven has recently appointed Allegra Day as its new ESG Director, sitting within Cinven’s Portfolio Team to ensure that ESG considerations are embedded in the value creation strategies of each portfolio company.
- ESG-linked loans – Cinven has successfully incorporated climate-related Sustainability Performance Targets (SPTs) into its recent ESG-linked financings with external verification for the assessment of these instruments conducted on at least an annual basis. Selected examples include:
- Arxada, a global specialty chemicals business (formerly Lonza Speciality Ingredients) includes annual targets for reducing carbon intensity and waste intensity.
- Restaurant Brands Iberia, the leading Quick Service Restaurant in Iberia (and master franchisee for Burger King in the region) includes GHG emissions avoided, installed power for electric vehicle chargers, and percentage of plant-based protein products vs animal protein products as its three Sustainability KPIs.
- Masmovil, the Spanish telecommunications operator, raised a financing in 2019 with its interest cost linked to the future evolution of an external ESG rating. In 2020, when the buyout transaction was financed, the ESG-linked loan element was extended to the company’s drawn debt – representing the first company in EMEA to do this.
- Industry drivers – Cinven is actively involved in several industry initiatives to help private equity practitioners, their portfolio companies and investors commit to and deliver significant climate- related improvements and support the transition to a lower carbon economy. These include:
- Initiative Climat International (‘iCI’) – In March 2021, Cinven became a signatory of the (‘iCI’), a GP-led initiative committed to actively engaging with private equity-backed companies globally to accelerate the transition to net zero. Cinven sits on the Net Zero Working Group.
- Invest Europe’s ‘Guide to Climate Change 2.0’ – Cinven co-sponsored this guide to provide tools to enable private equity managers to engage and interact with portfolio companies on material ESG issues.
- Sustainable Markets Initiative (‘SMI’) – Cinven is one of the founder members of the Private Equity Taskforce of the SMI to help accelerate the momentum towards a more sustainable future.
Commenting on these developments, Stuart McAlpine, Managing Partner at Cinven, said:
“Climate change is a significant challenge to societies today, and in the coming decades. The impact of climate change is being experienced around the world and requires all stakeholders – including financial institutions – to act.
“Private equity firms play an important role in addressing the impact of climate change. At Cinven, climate change is a strategic priority for the firm, as outlined in our most recent ESG Review here. Cinven is committed to integrating climate-related financial risks and opportunities into its investment process and portfolio value creation. We do this by supporting our portfolio companies to understand the impact of climate-related financial risks and opportunities on their businesses, and how their businesses affect the climate and environment.
“The transition to a net zero economy also presents opportunities to invest in businesses mitigating and adapting to the effects of climate change. We are proud that Cinven portfolio companies such as TK Elevator, MasMovil and HotelBeds have made net zero commitments, and we expect many more to follow in this decade of action until 2030.
We look forward to engaging with our investors, portfolio companies and other stakeholders around Cinven’s ambition to contribute towards net zero and resilient economies.”
