Making impact the priority in 2022 is no longer an option. The scale of the challenges at hand and their urgency justifies more than just awareness, it requires a massive, systematic change of investments towards companies that are committed to playing their role in accelerating social and environmental transitions.
Companies: the creators of positive impact dynamics
In 2020 and 2021, companies have demonstrated their role and influence in responding to major societal challenges. The recent crisis has accelerated awareness of climate change and inequalities, forcing companies to change quickly, particularly in terms of their carbon consumption and their corporate practices. For example, the number of purpose-led companies (entreprises à mission) has increased fivefold in a single year between June 2021 and June 2020.
Indeed, through the choices they make towards their employees, their suppliers and their customers, they create positive externalities that they then use throughout their ecosystems.
The transition to digital is also helping greatly with this because technological innovations have enabled new solutions to be implemented that can then be swiftly deployed at scale.
If companies do not want to miss their opportunity to make a positive impact in 2022, they must be given the financial means to do so, because they are in a position to most engage the whole of society in these transitions.
The impact must be applied globally, as the new normal
Whether it’s a start-up or scale-up, family SME or large group, everybody has the power to act in line with their own resources. Until now only a limited — although growing — number of companies have been proudly committed to a business model based on creating a solution to a climate or identified social problem. These so-called “impact” companies are examples that should be followed, both in terms of impact and growth, like Too Good To Go, Phénix or Castalie. We have to take things further.
Making an impact requires a couple of principles that every business has the ability to embrace. Firstly, there needs to be the intention to take action for social and climate issues. Next, the company’s business model needs alignment with social and climate objectives. And this also means aligning the compensation of the main stakeholders (managers, employees, shareholders) with these objectives. It is not as easy to identify those companies that incorporate impact as a lever for the creation of future value because they may operate in a very large number of sectors and industries. They stand out mainly through their commitments and practices. There is, for example, Splio, a SaaS neo-loyalty platform for retailers, which has made commitments to certain digital standards and is in the process of obtaining the BCorp label.
Private equity, a key player in accelerating the transition
Private equity, alongside executives and companies, supports these transitions in two ways and goes well beyond the ESG criteria that the financial industry has been demanding for several years.
First, through financing, which companies can use as leverage to grow and increase their impact. Take, for example, Tikehau, who are investing in the energy transition with a capital of 100 million euros in Amerenco which enables the solar energy producer to finance itself to the tune of 3 billion euros and thus accelerate its development and aim for a capacity of 3 GW of solar energy in 2023.
Above and beyond financing, private equity can also accelerate things on the operational front by setting out impact objectives and linking financial conditions to impact indicators. For example, the financing provided by Zencap and Capza Expansion to the restaurant group Big Mamma in September 2021 comes with social and environmental impact targets which, if hit, could decrease the debt repayment by a few base points. Last but not least, funds can play an influencing role by implementing impact best practices throughout their portfolio or by dedicating support teams (“operating partners”) to impact, like Marie-Gabrielle Sorin who have been providing operational impact and sustainability support for companies in the Ring Capital portfolio since March 2021.
Thus, it is vital that we reorient the investment strategies of institutional, corporate and private equity investors towards impact, whether this means impact-based models or those using impact as a lever for future value creation.
2022: has the global crisis been favorable to accelerating social and environmental transition?
Will the end of the pandemic and the electoral calendar in France constitute brakes to the intense mobilisation kickstarted by the Covid crisis? 2022 is indeed a decisive year as it has to confirm that, even when we return to normalcy, we are still definitively committed to these transitions. For France, 2022 is also the year that it assumes the presidency of the European Union and will have the opportunity to make its leadership felt on these issues.
We are willing to bet that impact will be top of the priority list for political, financial and economic decision-makers in 2022, so that the current mobilisation does not run out of steam.