Sustainability beats growth. More and more customers and stakeholders are making sustainability a condition for financing and investment. ESG criteria will soon be even more important for investors than the financial growth factor. The packaging industry has hardly recognized this development yet. It has a lot of catching up to do if it doesn’t want to sit in front of a source that has run dry in the future. And as a P.S.: Sustainability also shows up as a performance factor.
Sustainability is increasingly becoming an exclusion criterion in the private equity sector. Companies that cannot prove that their products, processes and services comply with ESG (environmental, social and governance) criteria will find it very difficult to obtain funds from investors or banks in the future.
The sustainability factor will be even more important than the issue of financial growth for investors in the future. The packaging industry has hardly recognized this development so far. By far the majority of companies have relevant catching-up to do, and this should not be put on the back burner. After all, those who fail to meet the sustainability requirements of private equity will look in vain for loans and financing in the future. The wake-up call is also a call to action: sustainability is a performance factor and therefore pays off for both sides.
Fact check: Private equity and sustainability
A PWC survey of executives from 162 private equity firms in 35 countries shows:
- 91% already have a responsible investing policy or ESG guidelines in place.
- 35% now have teams dedicated to responsible investment. In 2016, it was only 27%.
Transaction volume with PE participation totaled $260 billion in Europe in 2019.
ESG criteria are also becoming increasingly important for institutional investors. Just as for private equity, there are reasons for this.
Institutionals and sustainability
- More and more clients and stakeholders of institutional investors are demanding compliance with ESG criteria.
- Regulations in the area of ESG are creating additional pressure. For example, the new version of the EU Pension Fund Directive IORP stipulates that pension funds in Europe must identify and make transparent any potential climate risks in their portfolios from 2022 on.
Sustainability as a performance indicator
Another interesting point for investors and lenders is that there is a positive correlation between the performance of companies and their compliance with ESG criteria. Quite obviously, well-managed and sustainably operating companies are also better investment candidates. It should serve as a wake-up call to companies in the packaging industry, the other as a lure. They should definitely listen to the call, because the pent-up demand in the companies is high – and risky.