A case study in private equity’s role in realizing impact

Essential insights:

1. Sustainability in private equity: A catalyst for creating inclusive, sustainable economies.
2. Responsible exits work: Positive impacts are achievable, as shown by Bridges Fund Management’s exit from AgilityEco.
3. Just transition is key: Essential for meaningful, positive societal and environmental investment impacts.
4. More than money: Contributions span impactful practices and management support.
5. Proof of Impact: Demonstrating tangible outcomes affirms private equity’s value enhancing role.

The core of the debate

Recent discussions have raised critical questions about the role of private equity in fostering resilient, inclusive and sustainable economies. At the heart of this debate is whether private equity investments serve to enhance value or merely extract it, and whether they genuinely achieve impact objectives or dilute them.

Amidst scrutiny, the concept of responsible exits by impact-committed private equity players has gained prominence, challenging the notion that patient capital cannot be both impactful and temporary.

Case in point: Bridges Fund Management’s exit

Bridges Fund Management’s recent exit from AgilityEco to infrastructure services firm M Group Services serves as a concrete example of how private equity can positively answer these questions. This transaction showcases a responsible exit that enhances value and generates significant impact, particularly through the advancement of a just transition.

Advancing a just transition

The concept of a just transition, aimed at achieving a net-zero economy without leaving anyone behind, is becoming increasingly recognized. Fleshing out what a just transition investment strategy means was initially developed through the work of the G7 Impact Taskforce and further advanced by the criteria of the Just Transition Finance Challenge put forward by the UK Impact Investing Institute.

AgilityEco’s efforts to support low-income families in becoming more energy efficient exemplify the practical application of this concept, aligning with the Just Transition investment strategy’s criteria of making a net positive climate contribution, increasing socio-economic equity, and incorporating community voice, which was part of the annual quality and impact monitoring regime. It is a refreshing example of where environmental and social objectives are not merely aligned but deeply integrated.

Bridges’ material contributions

Bridges Fund Management’s role in enabling AgilityEco to meet its just transition objectives extends beyond bolstering the company’s ability to deliver more and better services.

By supporting management’s ambitions, including to embed impact management, and embracing employee ownership participation, Bridges demonstrated how private equity can enhance value and ensure the integration of environmental and social objectives.

Bridges’ investment also provided the stability and space for management to develop and execute a succession plan without destabilizing the business. Responding to management’s lead and bringing expertise and resources to convert ideas into action is the recipe for value enhancement for the enterprise, management and the investor.

Looking ahead: The need for tangible results

As we navigate the future of private equity, the imperative to demonstrate real and lasting impact has never been more pronounced. It’s essential to rigorously evaluate how these investments are genuinely transforming businesses and creating positive ripple effects in society and the environment. This level of scrutiny ensures that private equity aligns with the broader goals of sustainable and equitable growth.

We must challenge ourselves to look beyond near-term financial returns and ask deeper questions: What substantial changes have been spurred by these investments? Have they led to meaningful improvements in the business, in the lives of people, and in the health of our planet? The absence of at least three identifiable, positive outcomes signals a need to recalibrate our approach.

This rigorous scrutiny is not just about accountability; it’s about ensuring that private equity serves as a transformative force for societal well-being and environmental health. The successful exit of Bridges Fund Management from AgilityEco exemplifies this potential, marking a pathway for how responsible exits can embody the principles of a just transition and deliver real impact.

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Laurie J. Spengler is chief executive office at Courageous Capital Advisors