Adams Street has a long history of investing in sectors experiencing change, dislocation and growth. Our focus on technology, healthcare, engineering and manufacturing, and changing consumer preferences means we are well positioned to deliver capital to the most innovative emerging companies and business models with potential to tackle global sustainability challenges.
Adams Street places significant emphasis on developing the tools, frameworks, and monitoring and reporting mechanisms to support investment mandates. A portion of those mandates are designed to channel private capital to innovative emerging enterprises focused on delivering sustainable solutions, while also seeking to generate attractive financial returns.
In this report, we highlight progress made against our firmwide ESG goals, delve into our fast-evolving approach to evaluating climate-related risks and opportunities within our asset class, and provide an update on our engagement with the managers with which we actively invest.
We believe our approach to ESG and investing responsibly not only has the potential to deliver improved outcomes for society and the environment but also help us build more resilient portfolios within which underlying investments can be more successful over the long term.
Adams Street, of course, is not alone in this view. Private markets sustainability oriented and impact strategies have raised over $120 billion during the past five years1 with a growing focus on climate change as a leading impact theme. This reflects the appetite for exposure to these types of investments among institutional investors, who view impact and/or ESG as among the most attractive investment opportunities currently.2
As a firm, Adams Street aspires to be at the forefront of navigating this transition within our industry and being the partner of choice for clients who value our data driven, methodical approach, and our deep expertise in private markets investing.
– Jeff Diehl, Managing Partner & Head of Investments, Adams Street Partners
Firm Overview
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 material ESG factors into our investment decision-making process.6 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
Encourage greater transparency on ESG integration within their investment decision making and responsible ownership practices
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
Evaluate material ESG risks as part of our investment decision-making process and interactions with GPs and portfolio companies
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
Work collaboratively with industry peers towards improving ESG standards in private markets
Supporting Industry Organizations Promoting ESG-Related Initiatives9
ESG risk assessment is incorporated as an integral step in the investment decisionmaking process at Adams Street, a signatory to the United Nations’ Principles for Responsible Investment (PRI) since 2010. Our approach begins by pre-screening potential investment opportunities and partners, and post-investment monitoring and reporting continues throughout the holding period.
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 team and each of the key geographies in which we invest.
Responsibility for implementing Adams Street’s ESG Policy commitments is shared widely across the firm, with cross-functional oversight for our firmwide ESG initiatives and investment team-level accountability for integration of material ESG factors. Our ESG Committee:
Priorities & Progress
Adams Street strives for the continual improvement in our firmwide approach to investing responsibly by setting annual goals.
Impact Investing
To better analyze our exposure to climate-related transition risks within our investment portfolios, Adams Street engaged Risilience to provide quantitative financial assessments of how the transition to a low carbon economy might impact industries across different geographies under multiple transition pathway scenarios.
For more information about our efforts to evaluate climate-related risks and opportunities, read our inaugural TCFD Report, which can be accessed and downloaded from the Responsibility section in the Adams Street website.
GP Engagement
Adams Street annually surveys more than 200 active GPs to evaluate their overall approach to ESG-related topics. The survey questions are based, at least in part, on the requirements of key ESG standards and regulations such as the EU Sustainable Finance Disclosure Regulation, the ESG Data Convergence Initiative, TCFD recommendations and the UN PRI.
The overall results are used for in-house ESG ratings and client reporting. The results are also shared with participating managers at the end of the process, and each manager is offered an opportunity to participate in a debrief call to learn how they might improve their level of performance in the survey.
Over recent years, we have seen high levels of participation in our annual ESG survey for active GPs (63% in 2021, 87% in 2022, 92% in 2023) and continued improvement in key indicators of ESG good practice across the Adams Street platform. The charts that follow provide an overview of the level of institutionalization of ESG practices across all geographies and sub-classes of managers with which we invest.
Highlighted Findings From Adams Street’s Annual General Partner ESG Survey
ESG IN PRACTICE
Adams Street’s Director of ESG and Responsible Investing, Yohan Hill, met with Dr. Andrew Coburn, Chief Executive Officer and a founding member of Risilience, to discuss the risks and opportunities for investors and businesses arising from a low carbon transition and how this type of analysis can be used to inform strategy.
Risilience’s software-as-a-service-based analytics platform helps multinational organizations to understand the impact of climate change on their business and to navigate a path to Net Zero. In the 1990s, Dr. Coburn created a business that subsequently became Risk Management Solutions, Inc., the leading provider of catastrophe risk models to the insurance industry.
In addition to being an early-stage innovator in catastrophe modelling for insurance, Dr. Coburn pioneered the extension of tail risk analytics into subjects including mortality and pandemics, longevity and pension liabilities, terrorism and cyber risk. The focus of Resilience is now increasingly on corporate financial risk.
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.
Advancing DEI Initiatives with Partner Organizations18
Looking Ahead
Investors in private markets increasingly see ESG investing as a means to mitigate risk and capture opportunities in a way that aligns with their values and those of their beneficial owners. The rationale for risk mitigation and value creation has never been more prominent among GPs who increasingly recognize that there is a growing market for businesses offering sustainability-related solutions, and that managing ESG-linked topics can positively affect valuations.
Adams Street’s focus on investing responsibly is underpinned by the sustained interest of our clients and prospects in ESG and sustainability-linked strategies. An additional factor is the fast-evolving landscape of sustainable finance regulation in various parts of the world, particularly in Europe. Adams Street therefore continues to enhance its ESG-related practices to align with market practice and regulatory trends.
Climate-related transition risks and opportunities have been an area of increased attention for us in recent years and continue to be a thematic priority as we enhance our approach to investing responsibly, vis-à-vis our inaugural TCFD report this year, and engage with active managers. Our current goals in this area include promoting greater data transparency and mitigating exposure to climate-related risks. We look forward to reporting on our progress in this space in future reports.
– Yohan Hill, Principal & Director of ESG and Responsible Investing Investment Strategy and Risk Management, Adams Street Partners
Disclosures / Important Notes
1. New Private Markets Impact Fundraising Report FY 2023.
2. 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.
3. Firmwide AUM as of June 30, 2024; does not include the more recent private credit closings or private credit leverage which may be discussed herein or is available upon request.
4. As of June 30, 2024. Represents the number of active GP relationships maintained by Adams Street which includes GPs that Adams Street is invested on a primary or secondary basis (or has been invested with since 2019), as well as GPs that Adams Street has invested alongside in co-investments or provided lending support through private credit deals.
5. As of June 30, 2024.
6. The above 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. Award issued October 18, 2024. Awards conducted by Real Deals. Self-nominations are received online for all categories and assessed by the Real Deals editorial team. Shortlist entries are judged by an independent panel of ESG specialists who deliberate and select a winner in each category. Adams Street did not directly or indirectly provide compensation for inclusion in this ranking. The description and the selection methodologies of rankings and awards can be subjective and will often vary; additional information on the ranking or award methodologies is available from the sponsor and is linked above. These rankings or awards may not represent investor experience with Adams
Street or Adams Street’s Funds or services, nor do they constitute a recommendation of Adams Street or its services. Such ranking or award is not necessarily indicative of Adams Street’s past or future performance.
13. Certain organizations and their trademarks are included herein because Adams Street has an affiliation with such organizations as of the date hereof. Such relationship may be limited to Adams Street’s engagement of such parties as a third-party service provider. Inclusion does not indicate that such organizations have endorsed Adams Street Partners or its products or services and Adams Street’s relationship with such third-parties is subject to change.
14. Our sample size of survey respondents in 2023 was 162 for Buyout managers (146 in 2022 and 114 in 2021) and 54 for Venture Managers (53 in 2022; 37 in 2021). There were 61 respondents from the Asia Pacific region in 2023 (58 in 2022; 41 in 2021), 52 from Europe (48 in 2022; 40 in 2021), and 95 from North America (85 in 2022; 65 in 2021). 223 GPs in total were assessed in 2023 (205 in 2022; 157 in 2021), including a small number of managers classified in categories other than those listed above. Our annual ESG survey excludes managers that have requested not to be included (e.g., due to lack of capacity internally to respond) or that have historically not responded to requests to participate.
15. See Greenhouse Gas Protocol for definitions of Scope 1, 2 and 3.
16. The statements made herein represent the views and opinions of Dr. Coburn and do not necessarily represent the view and opinions of Adams Street Partners. The statements were made as of October 18, 2024 and are not subject to further update.
17. “Diverse Backgrounds” defined as representing professionals of color.
18. 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.