Make a positive impact – is one of the core corporate values of FLEX Capital. We are committed to sustainability: In our organization and in cooperation with our portfolio companies. Peter Waleczek explains, why we establish ESG standards and what role they play in our day-to-day business.
FLEX Capital is a young investor, but decisions about our portfolio companies already affect several hundred employees today. We therefore have a responsibility that we want to live up to through ESG standards. For us, this is an ethical decision.
ESG has dual economic benefits
At the same time, ESG standards also improve performance. Directly and indirectly, as shown by many studies on the various aspects.
Team diversity is an example of a direct benefit. It has been proven that diverse teams perform better. If you promote diversity through frameworks and rules, that is not only ethically noble, but also economically advantageous for a company.
An indirect effect is, for example, that companies that commit to ESG standards are more successful in their recruiting. Because more and more talents not only want to do a job, but they are looking for a meaningful job. With active ESG management, companies create environments that are attractive to top talents.
ESG guidelines are already widespread in the investor’s community and are communicated publicly. In addition to our intrinsic conviction that ESG is important and has a positive impact, it was without question to us to actively support the topic.
How we implemented ESG at FLEX Capital
How does ESG work optimally – there is no one-size-fits-all formula. It has to fit the company. Much of the information that is publicly available relates to industrial companies and could not be transferred like 1: 1 to FLEX. As an investment fund, for example, we have a significantly smaller carbon footprint, but a greater impact in the social area. Our ESG measures have a completely different focus.
We then did research and looked at other companies: How are they positioning themselves? How do you approach the subject? Discussions with other investors also helped us to find our own line and to decide which measures to take and what we would like to consciously approach differently. We are still in the process of developing our ESG approach. Internally, but also for our portfolio companies.
ESG reporting is part of working with portfolio companies
In our fund, ESG develops in parallel to the life cycle of our company. In the first step, it was important that we set clear criteria for the companies in which we want to invest. We directly excluded some sectors such as gambling or the arms industry, in other areas we saw gray areas. For this we have set criteria in order to decide: do we invest or not.
In the second step, we included ESG in the analysis with potential portfolio companies. In addition to a normal due diligence, we therefore also do an ESG due diligence.
We are currently in the third step. We want to anchor the ESG mindset in our contracts. Without ESG, there will be no more investment with us.
What does that look like? In one of our last deals, for example, we integrated a clause in the management contracts that there is a higher budget for cars with a better environmental balance. If a manager is a car freak, he can still choose freely, but this is how we try to guide the decision.
We are currently developing measures for various categories with our portfolio companies and setting goals so that these are then also included in the reporting.
Internal ESG mindset
At the same time, ESG is also part of our internal organization. Here we are already a few steps further ahead. We have defined goals and have drawn up plans for many areas and are now in the implementation phase. The task now is to make our results measurable, to continuously optimize them and to anchor ESG in really all areas.
The deeper we go into the subject, the more we see what is not going well or what could be better. An example: the environment. We are already a CO2-neutral company today, but we want to be CO2-negative in the future by consciously investing in projects that have a beneficial effect on the climate. We want to produce even less waste and use less energy.
In the social area, too, we do not want to be satisfied with the status quo. We could say that in the tech environment there are simply more applications from white men and that it is therefore not possible to form diverse teams. But that is not our position: We assume that we simply have not yet found the right methods to address other talents as well.
We go one level deeper
Sustainability is very important to FLEX Capital and we are already doing a lot in the ESG area. In the future, however, we want to go one level deeper and check how we can improve our impact.
That doesn’t always make our discussions with company owners easier, especially because some measures initially cause additional costs. But we are convinced that the commitment pays off in an entrepreneurial way. Regardless of this, the social pressure on the private sector to operate sustainably is increasing. In the future, ESG will be a natural part of the corporate organization. As FLEX Capital, we are actively promoting the topic of ESG. Because we are used to anticipating developments and recognizing opportunities. When it comes to investments and sustainability.