ESG Benefits: Supporting Increased Corporate Responsibility

Measuring ESG Benefits to Companies, Communities, and Funds

At Altvia, we believe that running our business in a responsible, beneficial manner requires serving the needs of all our stakeholders—including clients, partners, employees, and the communities where we operate.

While the “impact investing” movement has long recognized the positive effects that investment projects can have on society, the private equity industry as a whole is growing increasingly focused on concepts like environmental, social, and governance (ESG) and corporate responsibility.

ESG Investing: Doing Good Is Good Business

Following sustainable management trends that began in Europe, and the example of leaders like Patagonia founder Yvon Chouinard, American businesses are recognizing that “doing good” is good business. They’re also discovering that companies that aspire to be socially beneficial usually are.

Structuring investments under the guidance of ESG principles creates true win-win situations. While firms always conduct a risk management analysis and consider whether a deal is going to provide long-term ESG benefits for a community and its environment, increasingly, funds and institutional investors are including ESG  characteristics in how they evaluate investments at both the company and fund levels.

But there are lingering questions: How do we characterize those guidelines and how do we quantify being responsible?

The True Measure of Success with ESG

The goal for ESG investing isn’t avoiding controversial sectors like firearm manufacturers or strip-mining operations. Instead, it’s being able to demonstrate the beneficial impact that a fund’s investments have on the larger community while being profitable for direct stakeholders.

Measuring these results requires new metrics and analytics. But smaller companies, historically, are unaccustomed to recording and tracking these figures. That’s typically because they lack the resources, time, or knowledge to do so.

Even if a company has ESG investing data, there’s no standard to serve as a reliable yardstick for success. There’s also no format in place to report ESG stats efficiently. That’s something the industry is working on and a challenge where advanced private equity technologies such as Altvia’s can play a crucial reporting and communications role.

ESG Benefits and Altvia’s Perspective on Corporate Responsibility

Like Patagonia, Altvia takes an active stance on corporate responsibility and was recently recertified as a B Corp company—a process that demonstrates our adherence to non-profit group B Lab’s rigorous standards of social and environmental performance, accountability, and transparency.

We were also named to B Corp’s 2015 list of Best Companies for Workers, scoring in the top 10% of all Certified B Corporations on the B Impact Assessment for worker impact.

Organizations like B Corp are leading the charge in setting guidelines for evaluating corporate responsibility and business impact. Similar standards are gradually being worked out for the private equity industry. When we get there, funds and institutional investors will be well on their way to proving that businesses can be causes for good at the economic, social, and environmental levels.

European funds and asset managers have already made great progress in these fields. Today, it’s clear that ESG investing is here to stay.

A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.

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