ESG in practice

6 min readApr 5, 2024

The rising importance of ESG reflects a global recognition of the interdependence between business success and sustainable practices. Harriet Assem, BVCA Head of Sustainability, sat down with Markus Golser, Managing Partner and Head of ESG at Graphite Capital to get his take on how private capital firms are rising to the challenge.

Why is ESG important to Graphite Capital?

“Our ESG journey started over 15 years ago and gradually evolved, as did the industry as a whole. Many of our investors have dedicated ESG teams and highly sophisticated due diligence methods. We have been guided by them to stay on top of ESG developments, whilst also considering ESG within our own firm. Collecting and analysing sustainability data has helped us to pinpoint concrete benefits we’ve been able to deliver across our portfolio over the last 15 years. With time, we have increasingly been able to tie value creation with ESG objectives.

Prior to making an investment, we identify the areas in which a company is already focusing on ESG topics. We can then use our understanding of best practice for their sector to create tailored objectives. By identifying these early on, we can correctly assess what data we need and demonstrate the qualitative and quantitative improvements portfolio companies have made, which is what our investors want to see.”

What are the main opportunities/benefits you have noticed from integrating ESG considerations into your investment decision process?

“When we present our ESG work to a company we want to invest in as part of our pre-deal marketing, we are able to provide examples of how the implementation of ESG principles has made a positive impact on the financial performance of our existing portfolio businesses. We also see other tangible benefits from taking ESG seriously, ultimately leading to stronger financial metrics, for example, staff attraction and retention, and being able to stand out as an employer brand in competitive industries. Our portfolio company Hawksmoor, which recently won the BVCA Excellence in ESG award, is a great example of that. By building a strong corporate culture and sustainability ethos, we have created a like-mindedness among staff which is really powerful.”

Have there been any stumbling blocks to integrating your RI approach and can you provide any tips on how you have overcome them?

“There is a myriad of industry initiatives, and our job is to engage with portfolio companies on what is specifically material and meaningful to them. There is no ‘one-size-fits-all’ approach to sustainability, and it takes a strong understanding of its true purpose to ensure it does not become a tick-box exercise.

Although Graphite Capital invests in businesses that are able to dedicate internal resources to ESG, we also help them with our own ESG toolkit and our portals. Within this, we determine what initiatives would best suit a particular business. This could be using the SBTi initiative, joining the UN Global Compact, or exploring the B Corp route. However, in some cases these are not the best fit. This is one of the biggest challenges that requires positive engagement and a detailed understanding to find what will work best.”

Which tools or initiatives have you found to be most useful with onboarding ESG into your organisation and your investments?

“We are not re-inventing the wheel at Graphite Capital. We started our ESG journey with questionnaires like many of our peers and have now moved to much more rigorous data collection through dedicated ESG portals. The most important thing for us is choice. We don’t apply one singular approach for all investee businesses to comply with. We have two main advisors that help us with data collection and also work with specialist advisors to discuss specific areas within the environmental or social sphere.

We see our portfolio as a community. We use webinars and other tools to educate them on ESG and demystify some of the associated challenges. We recently ran one on the Science Based Targets Initiative, which was very well received by the portfolio. I see Graphite Capital as a facilitator of these conversations; bringing businesses together to become proactive on their ESG journey. Whilst ESG must be measurable to reach sustainability targets, these qualitative narratives are valuable and cannot be disassociated from the quantitative data.”

What do you think the ESG landscape will look like for the industry in the next 10 years? What are your wishes?

“I think the ESG landscape is very noisy, people get overwhelmed and don’t know where to start. Therefore, I would wish for two things. Firstly, I would like the industry as a whole to be able to determine with accuracy that ESG leads to better investment performance. To corroborate this with academic studies and provide solid evidence of strong positive correlation between ESG engagement and better financial returns. This would rebut the criticism that ESG is primarily an administrative burden or window dressing.

Secondly, I would be keen for us all to move beyond simple data collection and aim towards actions that make a tangible difference. For example, we should focus on how we can successfully help sequester carbon and increase biodiversity, rather than fall into the trap of simplistic offsetting. We must make a difference on the ground and I know some firms are already engaging in this thinking, as are we.

At Graphite Capital, we see our portfolio companies as anchored in local communities and socially active across various initiatives with a local impact. These could include prioritising staff engagement and welfare in multi-site operations, addressing poverty and education deficiencies in local communities, or increasing intra-community engagement. Our portfolio includes social care businesses, operators of training academies, tuition centres and schools, all of which work very much within their local communities. It is important to understand that these businesses are not just being run from a far-away head office but are an integral part of the areas they operate in.

I hope the industry becomes better at tapping into these opportunities over the next 5–10 years, clearly demonstrating positive impact and reaping other benefits alongside financial returns.”

What advice would you give to PE firms starting their ESG journey?

“The first piece of advice I would give is to ensure ESG is broadly embedded within your organisation. Whilst it is important to have ESG leadership, it should not be delegated to just one person. The more people that are involved and engaged, the better. It is also critical to understand what people care about personally and play into their strengths. For example, at Graphite Capital we have someone who is personally interested in rewilding and who has introduced us to rewilding initiatives which we as a firm can support.

My second tip would be to surround yourself with competent advisors, who can help educate you and stay on top of the myriad of ESG frameworks available.

And thirdly, to customise your approach to ESG and ensure you don’t just impose a framework on your portfolio companies that may not work for them. Engage in what makes sense for them, and how it can enhance their business model.”

This interview is taken from the second edition of the BVCA’s Creating Sustainable Growth: Private Capital at Work report. The full report can be found here.

Originally published on the BVCA website on 5 April 2024.




The British Private Equity & Venture Capital Association represents over 600 member firms, including more than 350 investment funds and institutional investors