The Private Market’s Role in ESG Transformation

Stockholm (HedgeNordic) – The field of environmental, social, and governance (ESG) investing has evolved and matured to the point where corporations, politicians, regulators, and investors can greatly accelerate market and business transformation for the better. With the luxury of long-term thinking and commitment, private market investors like AltamarCAM Partners believe they are well-placed to incorporate sustainable investment ideas and steer businesses and industries in the right direction.

“The international and European agenda is currently dominated by challenges such as energy transition and resource scarcity. Very ambitious targets have been set for the next few years, requiring the deployment of billions in additional investments that far exceed the capabilities of the public sector,” notes Miguel Zurita, AltamarCAM’s Co-Head of Private Equity and chair of the firm’s ESG Committee. “In this context, private investors play an increasingly important role, becoming the perfect ally to complement public investment and achieve the necessary goals.”

“Private investors play an increasingly important role, becoming the perfect ally to complement public investment and achieve the necessary goals.”

Due to the long-term nature of private market investments and the scope to shape the direction of underlying investments, private market investors can use their influence to accelerate ESG commitments and sustain the momentum behind ESG investing. “The private market investor has a lot to say in the sustainable transition,” argues Zurita. “At AltamarCAM we are closely following this moment of inflection in the sector, and we want to push beyond merely playing a participatory role in the progressive adaptation to this new “green” reality. Our aspiration is to position ourselves as a driver of change in the industry,” he emphasizes.

As one of Europe’s leading asset managers in private markets, AltamarCAM has invested with over 400 GPs, spanning Private Equity, VC, Private Debt, Infrastructure and Real Estate strategies, and with this reach comes influence and, above all, responsibility. “We maintain very close relationships with the managers we work with,” says Zurita. “We strive to raise awareness of ESG issues through continuous engagement with both GPs and LPs.”

AltamarCAM positions itself as a responsible investor, integrating ESG criteria in its investments across all asset classes, while also seeking to stimulate innovation within specific sectors tackling global challenges such as energy transition or access to healthcare. The asset manager has launched a real assets fund investing in targeted sustainable megatrends, including the growing need for healthcare, smart cities, digital transformation and decarbonization, among others. Separately, Zurita highlights AltamarCAM’s activities in the Healthcare space, where they are going to launch a new direct-investment fund focused on impact investment opportunities. “Our holistic approach allows us to align ourselves with best sustainability practices,” comments Zurita. “It also allows us to take advantage of commercial opportunities stemming from a growing appetite among our investors for sustainable funds.”

ESG and Investment Performance

One argument often heard in ESG discussions is that “doing the right things” comes at a cost and dampens performance. A growing body of research however suggests that companies may be helping the bottom line by improving their ESG performance. “At AltamarCAM, we understand the impact ESG factors have on an investment over the long term, which is also determined by the environmental, social, and governance performance,” explains Zurita. “For this reason, ESG factors are an integral part of our investment process and are always considered when evaluating potential opportunities. We are building ESG analysis into the investment Due Diligence process, while also giving great importance to our dialogues and ongoing engagement with fund managers and underlying companies, which are key to improving their ESG commitment in the long term.”

“At AltamarCAM, we understand the impact ESG factors have on an investment over the long term…”

Businesses and investors alike appear to have realized that incorporating ESG factors into their business models and investment processes is not only a necessary cost of satisfying the modern customer, but also brings financial rewards. One consideration does not need to supplant the other when allocating capital. “As stewards of capital, our ESG approach is characterized by our fiduciary duty to our investors, as well as our sense of responsibility as a company to our employees and other stakeholders,” emphasizes Zurita. “We believe that generating strong returns in a responsible and sustainable manner that benefit for example pensioners or insurance premium holders that have invested in it, which is in itself a way to contribute to society and give a clear example of good practice.”

ESG as a Megatrend

The integration of ESG factors into the investment process has gained momentum over the last decade, with ESG emerging as a key investment theme. “We could say that ESG is a megatrend on its own, which, in addition to dominating the global risk map, has created a range of tailwinds,” argues Jörg Höller, Chief ESG Officer at AltamarCAM. “These tailwinds present very attractive investment opportunities.”

Höller views the fight against climate change as the main environmental, social, or governance challenge faced by investors. “There is no doubt that the fight against climate change is the main challenge. In this regard, more and more initiatives are promoting transparency and regulatory pressure is leading investors to adopt a much more proactive role in emissions management,” says Höller.

AltamarCAM has also been intensifying its efforts around measuring and reducing their own CO2 footprint. “Since 2019 we have been carbon neutral at an operational level. At the portfolio level, despite the inherent difficulty we experience as a fund of funds manager, we conduct climate analyses aligned with international benchmark standards,” says Höller. To accelerate its efforts associated with combating climate change, AltamarCAM has adhered to the Task Force on Climate-Related Financial Disclosures (TCFD), the Initiative Climat International (iCI), as well as the Institutional Investors Group on Climate Change (IIGCC). “To face this unprecedented challenge we must engage with the leading initiatives in the field and keep up to date with all the new developments affecting our market,” argues Höller.

Going beyond the E and G aspects of ESG, an important issue in the asset management industry under the social pillar is the lack of diversity, according to Höller. “Internally, diversity is one of the most important drivers in our industry,” says AltamarCAM’s Chief ESG Officer. “This sector has traditionally been male-dominated, and while significant progress has been made, there is still a long way to go,” he emphasizes. As of June 2023, 42 percent of AltamarCAM’s workforce are women. “We continue to work on formalizing processes and career plans that will allow us to continue improving these statistics,” says Höller. “We are also very conscious of understanding and managing diversity in the broadest sense of the term, and are developing specific projects that will enable the identification of all the implications that the concept of “diversity” has for us.”

“We are doing everything we can to ensure we have the resources and strategies in place to best serve our employees, investors and society as a whole.”

Zurita and Höller are proud of the progress AltamarCAM has made so far, and themselves represent two key figures within the wider organisational ESG framework within the business, which counts on a firm-wide ESG committee and steering group in addition to the dedicated ESG team. The results of the latest PRI report on AltamarCAM, which awarded four- and five-star ratings across all reported categories, are a testament to what has been achieved. “ESG is at the core of our corporate culture and investment DNA, and is a fundamental characteristic of our role as a trusted advisor. We are convinced that it offers long-term financial opportunities,” affirms Zurita. “We are doing everything we can to ensure we have the resources and strategies in place to best serve our employees, investors and society as a whole.”

AltamarCAM Partners

A leading independent private asset manager and solutions provider
AUM: €17.5b
+19 years of experience
Asset Classes: Private Equity, Venture Capital, Life Sciences, Infrastructure, Real Estate, Private Debt
Office Locations: Madrid, Cologne, New York, Barcelona, London, Munich, Santiago de Chile