LONDON: The top shareholder of carmaker Aston Martin is on a mission to turn investments from theme parks to high-end furniture brands "carbon positive" by the end of 2020, as buyout funds battle to woo investors increasingly focused on tackling global warming.
Investindustrial committed to a series of ambitious environmental, social and corporate (ESG) goals when raising its seventh 3.75 billion euro (US$4.08 billion) fund last year.
Chairman Andrea Bonomi, one of Italy's most famous business magnates who set up the European buyout group in 1990, told Reuters the firm was on track to become carbon positive across all of its investments by the end of 2020 - meaning it will offset more than the carbon emissions of portfolio companies.
The firm wants 75per cent of electricity consumption across its investment portfolio to be sourced from renewable energy by 2020 and aims to hit 100per cent by 2027.
"It has been a long journey. As a firm we became carbon neutral ten years ago but we didn't stop there," Bonomi said.
"The ultimate goal is to raise the sustainability bar and cut fuel emissions across all our investments while keeping returns high. It is a tough balancing act as investors are no longer willing to accept returns at any cost."
While most buyout funds tend to showcase ESG credentials to their institutional investors - typically pension funds, insurers and family offices - there is no industry consensus on how to measure their progress.
Investindustrial, which has Nordic funds among key investors including Denmark's biggest pension provider ATP and Sweden's AP2, has been working with the NYU Stern School of Business since 2016 to pilot a new system to track the financial benefits of ESG policies known as Return on Sustainability Investment (ROSI).
"We have been very satisfied with Investindustrial's way of incorporating ESG in their investments and they are without any doubt one of the funds in our portfolio which are among the best in that area," managing partner at ATP Private Equity Partners, Torben Vangstrup, told Reuters.
Since 2016, Investindustrial has pressured its portfolio companies to comply with the targets of the Paris climate agreement, urging them to switch to renewable energy, cut plastic consumption and improve recycled waste.
For example, Spanish theme park operator Portaventura, which has been backed by Investindustrial for almost a decade, recently launched a 100,000 square meter photovoltaic site that provides about 40per cent of its overall electrical consumption.
Aston Martin, meanwhile, has stepped up recycling efforts and is due to launch an all-electric version in 2025. Its newly-launched factory in Wales is fully powered by renewable energy.
"Large buyout funds have been quick at building ESG teams but execution takes time. It took us five years to figure out how to bring down the carbon footprint across our funds," Bonomi said.
Investindustrial, which is invested in 20 companies primarily in Italy and Spain and ranks as one of southern Europe's largest private equity groups, expects its offsetting measures to reach 2.6 million total carbon dioxide equivalent (tCO2e) - a gauge of such activity - by the end of 2020.
Its carbon reduction strategy partly relies on the development of a portfolio of nature conservation projects in countries including Guatemala and Canada.
Bonomi has built a five-strong ESG team, led by sustainability head Serge Younes, to support Investindustrial in screening targets and oversee the implementation of eco-friendly policies.
"Without ESG approval deals are not going through the investment committee," the 55-year-old said.
The New York-born businessman said its smaller size made it easier for Investindustrial to control ESG policy at its portfolio companies compared with heavyweight U.S. buyout funds.
"Every time you invest in a company the CEO will tell you that he operates 'within the law.' But that's not the point. Most companies have basic environmental policies in place," said Bonomi.
"What really matters is to make ESG an integral part of your decision-making process and drive returns in a sustainable manner."
(US$1 = 0.9195 euros)
(Reporting by Pamela Barbaglia in London; additional reporting by Stine Jacobsen in Copenhagen; editing by Mark Potter)