Tailored ESG integration for our activities
OPPORTUNITIES HAVE BEEN ANALYZED IN PRIVATE DEBT AND CO-INVESTMENT WITH THIS NEW METHODOLOGY
Our improved ESG framework for Ardian Private Debt and Co-Investment strategies was developed as part of a larger project to incorporate ESG considerations more fully into investment activities where Ardian does not have majority control. These situations demand a more tailored approach to areas including due diligence, monitoring and scoring frameworks, and reporting to LPs that takes account of Ardian’s non-controlling interest.
Ardian Private Debt adopted a reinforced approach to integrating ESG during 2021 that resulted in its latest generation, Private Debt V, becoming one of the first Ardian funds to achieve Article 8 classification under the Sustainable Finance Disclosure Regulation – an ambitious goal for debt funds in the industry. Article 8 funds integrate specific ESG factors into the investment process and report annually on portfolio companies’ ESG performance.
During due diligence, we now systematically carry out an in-depth dual analysis of the portfolio company and sponsor, with an improved screening framework for the company, including a climate materiality and SDG contribution analysis. For sponsors not already covered by the Ardian Secondaries & Primaries monitoring program, we carry out due diligence using a new ESG questionnaire. Deal memos include an expanded ESG analysis with more granular information on material topics. This section is produced by the investment team with the support of the Sustainability team.
A similar approach was developed for the Co-Investment activity, hand in hand with the investment team. We focus specifically on assessing the impact of portfolio companies' products and services against the SDG framework. After analyzing 120+ deals from the four most recent funds, we found that c.34% of the amount invested through the Co‑Investment portfolio contributed directly to at least one SDG.
Ardian’s Sustainability team delivered a tailored ESG Deal Kit tool for Private Debt and Co-Investment transactions. We also held training sessions on sustainability for both investment teams to help them analyze ESG issues and improve implementation at each stage of the investment process.