DRIVERS FOR FUTURE DEVELOPMENT IN PE
ESG & PE
The integration of ESG factors into the investment and decision-making processes in the private equity sector has increased exponentially in recent years. In Luxembourg, more than 80% of PE houses consider ESG a key topic for their future investment and marketing strategy. The same proportion claim to have already set up an ESG policy and has committed to incorporate non-financial reporting linked to ESG in the short run.
CASE STUDY: INNPACT S.A.
ESG & IMPACT INTEGRATION IN THE INVESTMENT PROCESS OFAPEFUND
Luxembourg-based Innpact supports Private Equity fund managers, among others, to strengthen their fund’s Environmental and Social practices. It does so by (i) ensuring consistency between the fund’s mission and sustainability objectives in alignment with the UN SDGs, (ii) integrating impact criteria into the due diligence and investment decision process, (iii) designing a robust ESG & Impact risk framework, and (iv) by integrating sustainability and impact indicators within portfolio management as well as in monitoring and reporting practices.
PE funds are thus recommended to fully integrate positive impact generation into their structure on a progressive level – from the fund’s governance to investment strategy, financial model and reporting indicators. This requires full active participation from top management and a strong alignment with investee companies. Innpact can provide support during the pre- & post-closing phase to ensure alignment with regulatory and reporting requirements with various levels of involvement ranging from compliance and internal trainings to acting as Impact & Sustainability Advisor.
INNOVATION & PE
PE plays an important role in directing capital into innovative projects, as well as a mentorship function to help increase the odds of start-ups succeeding. Moreover, particularly in the post COVID-19 context, the anticipated continued growth of the tech sector will likely prove to be a key draw for PE firms. According to S&P’s 2021 Global Private Equity Outlook, 51% of surveyed firms expect to primarily focus on opportunities in Information Technology in the coming 12 months.
CASE STUDY: APOLLONIAN S.A.
Founded in 2017, Apollonian is a Luxembourg-based software- as-a-service company harnessing technology and data to provide comprehensive company analysis and multidimensional valuation solutions. Apollonian’s flagship platform, Insight, integrates organisations internal and external value-generating factors and revenue-driving assets, including intangibles, to produce a transparent and realistic third-party assessment of the present and future company value. Most recently, Apollonian has expanded its product offer by partnering with Modefinance, an Italian fintech company, to deliver ESMA certified credit rating and credit scoring services. By leveraging artificial intelligence and predictive analytics Apollonian is now capable of evaluating more than 250 million companies worldwide.
Striving to close information gaps existing in the private equity market and facilitate investment decision-making, Apollonian solutions cater for private portfolio managers helping them to identify relevant transaction leads, improve their deal flow management, due diligence processes and portfolio management. It also helps companies seeking to raise capital, mitigate risks and boost growth.
Apollonian expertise in intellectual assets valuation considers key elements such as intellectual properties & rights, trademarks, R&D capabilities, knowledge carriers and human capital skillsets – assets that show if a company will be able to survive and prosper in a competitive environment over the long haul.