At Adams Street we believe that the integration of Environmental, Social, and Governance (ESG) factors in our investment decision making can have a positive impact on performance, including by helping to mitigate certain investment risk.
This reflects the view of not just our firm but the wider investment industry and the majority of our LPs.
As many as 93% of LPs who took part in our 2023 Global Investor Survey1 agreed that investment returns are enhanced by incorporating material ESG factors into decision making.
The research also found that 33% of institutional investors believed that impact and/or ESG offered the greatest investment opportunities for private markets in 2023; in line with venture capital (33%), and second only to technology and healthcare (40%).
The analysis also supports our view that ESG investing is consistent with our fiduciary duty to investors, and that we are better equipped to generate superior risk-adjusted returns by taking material ESG factors into account.
We recognize that many investors are increasingly seeking to align their investment mandates with their values and the sustainability goals of the institutions they represent
As a firm with over 50 years experience in private markets, we recognize that many investors are increasingly seeking to align their investment mandates with their values and the sustainability goals of the institutions they represent.
Our ESG policy commitments and institutionalized ESG capabilities, in combination with our proven portfolio construction expertise, allow us to facilitate these requirements without compromising financial performance.
Adams Street consistently strives to gather the relevant ESG data needed to inform our investment decision making. We support industry initiatives that we believe can facilitate greater transparency on ESG-related topics and improve the functioning of private markets.
We will continue to gather primary ESG data from our investments where possible, to support our approach to investing responsibly and meeting our client and regulatory obligations.
Ultimately, we believe our efforts in this area contribute to transforming the markets that we serve to make them more resilient and sustainable over the long term.
– Jeff Diehl, Managing Partner & Head of Investments, Adams Street Partners
Adams Street has focused exclusively on private markets investment management since the firm’s founding in 1972. Adams Street manages assets for institutional investors, including corporate and public pensions, foundations, family offices, and endowments. Our deep industry experience and global insights provide clients with customized access to the spectrum of private markets strategies. Adams Street has 12 offices located in Austin, Beijing, Boston, Chicago, London, Menlo Park, Munich, New York, Seoul, Singapore, Sydney, and Tokyo.
Adams Street has been recognized as one of the most respected and experienced private markets investment managers in the industry.
ESG & Our Investment Process
Adams Street is committed to investing responsibly and our firm has long incorporated ESG considerations into our investment decision-making process. Over five decades of private markets investing, Adams Street’s investment diligence has considered such factors as a fund’s or portfolio company’s governance practices; the quality, sustainability and transparency of its operations; and the geographic scope, industry-specific attributes, and other impacts of its business.
Key Focus Areas of Adams Street’s Firmwide ESG Program
Provide data driven insights on our ESG practices and the ESG attributes of our investment portfolio
ENGAGE WITH GPs
Encourage greater transparency on ESG integration within their investment decision making and responsible ownership practices
MANAGE REPUTATIONAL RISK
Conduct systematic pre-investment screening of new investment opportunities and post-investment monitoring of our GPs and underlying portfolio companies for any severe ESG incidents8
SEEK TO MINIMIZE POTENTIALLY ADVERSE IMPACTS
Evaluate material ESG risks as part of our investment decision-making process and interactions with GPs and portfolio companies
DEVELOP IMPACT INVESTMENT STRATEGIES
Where appropriate, we design and implement strategies with the aim of delivering positive outcomes for society and the environment, alongside financial returns in line with the ESG and impact objectives of our clients
INDUSTRY-WIDE ESG INITIATIVES9
Work collaboratively with industry peers towards improving ESG standards in private markets
Supporting Industry Organizations Promoting ESG-Related Initiatives9
Adams Street became a signatory to Principles for Responsible Investment (PRI) in 2010. Our ESG Policy and ESG Committee support investment teams in the development and implementation of our ESG Framework and supplement our firmwide ESG engagement and reporting efforts.
Adams Street ESG Framework10
ESG Oversight & Accountability
Adams Street’s dedicated ESG Committee meets quarterly and oversees ESG integration. The committee includes representatives from each investment teams and each of the key geographies in which we invest.
Responsibility for implementing Adams Street’s ESG Policy commitments is shared widely, with cross-functional oversight for our firmwide initiatives and investment team level accountability for ESG integration. Our ESG Committee:
“Our ESG Policy, which was first introduced in 2011, is regularly reviewed by Adams Street’s ESG Committee and updated to reflect firm practices and an evolving regulatory landscape, which we actively monitor.”
– Sara Dasse, Partner & Chief Compliance Officer, Adams Street Partners
Firm-Wide ESG Integration
Priorities & Progress
Adams Street sets ambitious annual goals to continually improve our approach to investing responsibly. Recent focus has been on further enhancing ESG data for our clients, improving our ESG Framework, and introducing structured ESG training for our investment professionals.
Since 2010, Adams Street has deployed more than $2 billion into 30 primary and 40 growth equity and co-investments that we believe align with our core impact investment themes.13
With respect to potential impact investments, Adams Street focuses on four core themes – health and wellness, education and enrichment, economic development and sustainability.
Impact investments are made with the intention of generating a positive, measurable, social or environmental impact alongside a financial return. Any investment we make that we believe fits within one of our core impact themes would therefore be subject to the same underwriting rigor that we bring to any private equity investment.
We currently track more than 700 impact funds globally, with collectively about $70 billion of dry powder to invest. The average impact fund today that we track is raising around $500 million.
We have seen strong demand for impact-related products globally from both institutional and retail investors. The dynamic of more and bigger private markets investment managers building impact offerings has created a larger buyer universe, which should in turn lead to stronger deal flow. We believe the opportunity set, which has never been larger, will continue to grow.
For Adams Street, we believe sustainability represents the largest opportunity within impact, especially with strategies that target energy transition, decarbonization, renewable agriculture, grain transportation, care of natural resources, building efficiency, and intelligent infrastructure. We also continue to see attractive opportunities in products and services that increase access to healthcare, financial services, and education and training.
– Matt Autrey, Partner, Primary Investments, Impact Investment Committee Chair, Adams Street Partners
IMPACT AND ESG-FOCUSED INVESTMENTS
Watch to learn more about Adams Street’s considerations and perspectives on impact and ESG-focused investments.
Adams Street generated an overall ESG score based on level of ESG disclosure for 200+ active GPs in our 2022 survey.
We are encouraged by the significant growth in manager participation in the exercise and improvements in key indicators of ESG integration across the Adams Street platform. These include:
Adams Street used Apex ESG Ratings Ltd, a third-party ESG ratings provider, for the second straight year to conduct the survey. Questions were derived from the requirements of four key ESG standards and regulations: the EU SFDR, the ESG Data Convergence Initiative (EDCI), Task Force on Climate-Related Financial Disclosures (TFCD), and PRI.
Highlighted Findings from Adams Street’s Annual General Partner ESG Survey
ESG In Practice
KEY ASPECTS OF THE ASTORG APPROACH
Climate – Commitment to reducing direct emissions by 50% by 2030 (against a baseline of 2020) and ensuring that 30% of its invested private equity capital will have science-based targets by 2025, and 100% by 2030.
DEI – Targeting 40% board participation of women and underrepresented minorities in all investments as of 2022.
Impact – A target to invest up to 10% of total commitments of Astorg VIII fund in companies that advance positive health and accessibility outcomes for people living with disabilities and chronic conditions.
Information Security – Goal to reach the highest sector standards of information security for 100% of portfolio companies within three years of acquisition.
A CONVERSATION WITH ASTORG PARTNER VIVIANA OCCHIONORELLI
Listen to Yohan Hill, Principal & Director of ESG and Responsible Investing at Adams Street, discuss ESG in practice with Viviana Occhionorelli, Partner with oversight of the ESG program at Luxembourg-based private markets investment manager Astorg.
Viviana joined Astorg in 2018. Before that she worked as Global Sustainability Manager at Barco and as European Environmental Manager at Sony Electronics. Viviana has expertise in circular economy, eco-design and supply chain sustainability. She studied Sustainable Development at Imperial College London, holds a Master’s Degree in Environmental Technology from Oxford Brookes and has an MBA from Vlerick Business School.
References to any current or prior Adams Street investment are provided for discussion purposes only and nothing contained herein constitutes a recommendation or solicitation for any investment manager or investment vehicle advised thereby.
Diversity, Equity & Inclusion
Adams Street celebrates inclusion and believes that diversity strengthens our business. We embrace different perspectives and cultures to generate great ideas, which we believe brings value to our clients, our investments, and our communities. Adams Street is committed to increasing diversity within the financial markets by enhancing access, contributing to educational initiatives, and engaging staff in outreach opportunities.
INCLUSIVE, DIVERSE CULTURE
ENCOURAGING DEI AT PORTFOLIO COMPANIES
Adams Street is committed to increasing diversity internally and throughout the financial markets through enhanced access, contributions to educational initiatives, and staff outreach opportunities.
Bringing the Strength of the Adams Street Platform to Diverse Managers17
Adams Street has a long history of investing responsibly and is a highly regarded private markets thought leader. We believe 2023 has been a capstone year with respect to our ESG initiatives.
Many of the strategic initiatives first conceived when I joined have now been realized in ways that have surpassed expectations. We are now focused on building upon that strong foundation to create a vision for the next phase of ESG development at Adams Street (ESG 2.0).
The key to success in this area is to continue to exercise rigor in investment selection backed by sophisticated tools, systems, and processes that have the ability to deliver positive ESG-related outcomes
The challenge is significant and not to be underestimated, as shifting attitudes toward ESG investing in some parts of the US, along with continuing regulatory scrutiny in the EU, UK and the US (at the federal and state level) are making the landscape for ESG and impact investing more complex.
With the support of the entire Adams Street team, I am encouraged by our response to these challenges through ongoing firmwide ESG initiatives, strategic product development, and our continued engagement with LPs, GPs and the wider industry, many of which continue to show rising interest in ESG-focused and impact investments.
The key to success in this area is to continue to exercise rigor in investment selection backed by sophisticated tools, systems, and processes that have the ability to deliver positive ESG-related outcomes. We believe this is well within our grasp, given the continued support of the Executive Committee and colleagues across the firm, without whom our achievements to date could not have been realized.
– Yohan Hill, Principal & Director of ESG and Responsible Investing Investment Strategy and Risk Management, Adams Street Partners
Disclosures / Important Notes
1. Over six weeks leading into 2023, Adams Street Partners surveyed 106 limited partners for their views on a variety of topics that were a cause for optimism or concern. Participants included pension funds, institutional accounts, and portfolio managers located in the US, Europe, and APAC. The findings of this research are shared across a variety of media to effectively highlight key conclusions on geopolitical risk, ESG trends, and the outlook for select strategies, sectors and geographies. Included in the research are insights into the factors that institutional investors report they are considering in order to best seize opportunities in the future.
2. Firmwide AUM as of September 30, 2023; does not include the more recent private credit closings or private credit leverage which may be discussed herein or is available upon request.
3. Represents the number of general partners in which Adams Street is invested.
4. The content “Investing Responsibly is Key to Long-Term Success” represent Adams Street’s aspirational goals and there can be no assurance that such goals will be achieved.
5. Adams Street has not historically managed vehicles with an impact investment mandate unless part of a client’s individual mandate; rather, Adams Street’s consideration of material ESG factors has been part of its investment process, which also includes consideration of a range of other factors including those relevant to an investment’s risk/return profile.
6. The graphic represent Adams Street’s aspirational goals and there can be no assurance that such goals will be achieved.
7. Adams Street has not historically managed vehicles with an impact investment mandate unless part of a client’s individual mandate; rather, Adams Street’s consideration of material ESG factors has been part of its investment process, which also includes consideration of a range of other factors including those relevant to an investment’s risk/return profile.
8. The level of diligence and/or oversight performed prior, or subsequent to, making an investment is performed in Adams Street’s discretion, including, but not limited to factors, such as the relationship with the GP and the relative size of the investment.
9. Certain organizations and their trademarks are included herein to which Adams Street is a signatory, has guiding principles to which Adams Street aims to adhere, or which Adams Street otherwise looks to and/or supports with regard to various ESG standards. Inclusion does not indicate that such organizations have endorsed Adams Street, nor a guarantee that Adams Street will take any particular action with regard to ESG issues.
10. The summary of Adams Street’s current process with respect to ESG-related diligence and monitoring is provided for illustrative purposes only, is subject to change and there can be no guarantee that all investments will undergo each of the investment steps described above. While Adams Street considers broad ESG factors in its risk analysis and investment processes, the firm does not directly consider “adverse impacts of investment decisions on sustainability factors” as contemplated by European Union Regulation 2019/2088 at this time. Adams Street may adopt further measures which take into account adverse impacts of investment decisions in this context.
11. Adams Street has Street has contracted with RepRisk AG (“RepRisk”), a leading ESG research provider whose coverage includes private companies. RepRisk screens, on a daily basis, over 100,000 public data sources in 23 languages to systematically identify any company or project associated with an ESG risk incident, per RepRisk’s research scope.
12. Adams Street has not historically managed vehicles with an impact investment mandate unless part of a client’s individual mandate; rather, Adams Street’s consideration of material ESG factors has been part of its investment process, which also includes consideration of a range of other factors including those relevant to an investment’s risk/return profile.
13. This includes backwards looking categorization of investments that were not made as part of an impact investment mandate.
14. Our sample size of survey respondents in 2022 was 146 for Buyout managers (114 in 2021) and 53 for Venture Managers (37). There were 58 respondents from the Asia Pacific region in 2022 (41 in 2021), 48 from Europe (40), and 85 from North America (65). 205 GPs in total were assessed in 2022 (157 in 2021), which included a small number of managers that fell into categories other than those listed above.
15. See Greenhouse Gas Protocol for definitions of Scope 1, 2 and 3
16. “Diverse Backgrounds” defined as representing professionals of color.
17. Certain organizations and their trademarks are included herein to which Adams Street is a signatory, has guiding principles to which Adams Street aims to adhere, or which Adams Street otherwise looks to and/or supports with regard to various Diversity and Inclusion standards. Inclusion in the above list does not indicate that such organizations have endorsed Adams Street, nor a guarantee that Adams Street will take any particular action with regard to Diversity and Inclusion issues.
Important Considerations: This information (the “Paper”) is provided for educational purposes only and is not investment advice or an offer or sale of any security or investment product or investment advice. Offerings are made only pursuant to a private offering memorandum containing important information. Statements in this Paper are made as of the date of this Paper unless stated otherwise, and there is no implication that the information contained herein is correct as of any time subsequent to such date. All information has been obtained from sources believed to be reliable and current, but accuracy cannot be guaranteed. References herein to specific sectors, companies, or investments are not to be considered a recommendation or solicitation for any such sector, company, or investment. Past performance is not a guarantee of future results. Projections or forward-looking statements contained in the Paper are only estimates of future results or events that are based upon assumptions made at the time such projections or statements were developed or made. There can be no assurance that the results set forth in the projections or the events predicted will be attained, and actual results may be significantly different from the projections. Also, general economic factors, which are not predictable, can have a material impact on the reliability of projections or forward-looking statements.