Private equity has been described by many as the purest form of capitalism. A number of stories this week suggest that doing good may also be compatible with the naked pursuit of profit.
Doughty Hanson, a European buyout firm, appointed Adam Black to advise portfolio companies on environmental, social and governance issues.
While George Coelho left Balderton Capital to join Good Energies, a renewable energy investment firm, which promises “power for a better world” and whose mantra is “people – planet – profit”.
And Global Infrastructure Partners, which completed fundraising for its flagship first fund, with total commitments of $5.64 billion (€3.65 billion) this week, may also offer leadership in this respect. Its remit is to invest in businesses essential to the quality of life and to improve them.
Stephen Marquardt, head of investor relations and joint chief operating officer at Doughty Hanson, said a company’s ability to sustain returns over the long term was partly dependent upon its adherence to strong governance, sound environmental stewardship and social responsibility.
Indeed the latest chapter in Coelho’s varied career has taken him to a firm, whose investment in Q-Cells, a German-listed solar energy company, has so far reaped a €1.1 billion return. The firm still holds a 50 percent stake in the €6.3 billion business.
In this light it will be interesting to track Black’s impact on Doughty Hanson. As a potential cost to the firm’s deal doers he will have to demonstrate a real financial contribution to allay any cynic's suspicion that such appointments are little more than a “greenwash”.
Dollars and cents are what his partners find persuasive, not the warm glow from a heightened environmental consciousness. And Doughty’s investors will expect nothing less than top decile performance.
The obvious strategy is to take a leaf from Good Energies’ and Global’s book and look to those businesses where social and environmental concerns are at the heart of the profits.
Global’s recent acquisition in tandem with Montagu Private Equity of Biffa, the waste management group, is a case in point. The business also has an alternative energy component, which the firms will develop: using waste to generate power.
Perhaps there is nothing really that novel about the current trend. As an old English saying has it: “Where there’s muck there’s brass.” The industry is just redefining the muck.