Why Ardian embraces sustainable development
French investment firm Ardian is one of the largest investment firms in the world, managing and advising over 125 billion dollars of assets. It holds a strong position in Europe, supported by a long-term strategy, especially in sectors linked to energy transition and efficiency. Behind this choice lies the acceptance that the energetic transition is a revolution that cannot be stopped, and must therefore be embraced, anticipated and fuelled.
Much has changed in the world of asset management in past decades. ESG considerations were considered, at the turn of the century, to be either irrelevant in the world of asset management, or a development speed-bump. Even today, asset managers are only slowly adapting to the new demands of our times, as explained by economic reporter Julie Faure: “In this situation, collecting and interpreting ESG data can be complex, time-consuming and therefore discouraging. It is still too early to tell whether the global regulations currently underway will put an end to the problem, but it is a step in the right direction.” Some firms, however, have already chosen to take the lead on what they consider to be an inevitable revolution on the asset management market.
Progress in terms of Environmental and Social Governance (ESG) can be made everywhere, even in the most inconspicuous areas. Ardian chose to go deep into the industry, by investing into Ivalua, one of the world’s leading firms in supplier management software. Supply chain management harbors particular potential for ESG progress, given the high carbon footprint of supply chains and the strain commonly found in supplier-customer relations. The leaner the operations, Ardian wagers, the better the ESG performance.
With the backing of Ardian and co-investors, Ivalua has been able to achieve both economic performance and ESG leadership, as stated by reporter Bertrand Maltaverne, following Ivalua’s annual event, announcing new features including “Decarbonization (and broader ESG) related capabilities across the platform to enable customers to understand where they stand (baseline), defining reduction targets, collaborating with suppliers, and integrating CO2/climate change in other processes (supplier performance, risk, etc.) and incentivized decarbonization via product recommendations and basket optimizations based on CO2 and dynamic discounts and rebates to reward carbon-friendly suppliers.”
Initially accompanied by Ardian and KKR, Ivalua saw its strategy recognized throughout the market, as additional investors joined the venture. The logic behind this choice runs deep: poorly designed supply chains place an additional and unnecessary burden on the energetic footprint of businesses. Applying ESG best practices to investment targets will be beneficial for investors, stakeholders and the environment altogether.
Unsurprisingly, Ardian has invested into aerial transport infrastructures, both for its growth potential and for the environmental progress margin which remains in this field. In 2019, it decided to invest in Trieste airport, and immediately started tackling all major stakes. IREI reported that “The investment plan includes €15 million ($17 million) for the strengthening of flight infrastructures and an €11 million ($12 million) investment for further infrastructural improvements, airport services and other buildings. An amount of €2 million ($2.2 million) will also be invested in “green projects” through the installation of renewable energy systems. Lastly, €2 million ($2.2 million) will be allocated to airport security and further upgrades of access roads.” Ardian must find a delicate balance between growth potential (sought by investors but known to often disregard environmental considerations) and ESG performance (which is difficult but necessary to any durable strategy). Aerial transport infrastructure represents, despite its challenges, one of the best places to achieve this double feat.
Ardian has chosen to push the environmental transition upwards, by investing in raw material manufacturing and basic food ingredients, and adapting the investment vehicle to modern environmental standards, through its acquisition of Cérélia in 2019. At the time, it communicated on its website: “Cérélia has an unwavering commitment to sustainability, utilizing farming practices that promote biodiversity, local production whenever possible and green energy to reduce its carbon footprint. Furthermore, the Company’s continued prioritization of innovative production practices and reduction of packaging materials will support the growth of disruptive new product opportunities.” Farming has a problematic carbon footprint, and the industry is oftentimes called out for it. Ardian believes environmental performance can be achieved even in those challenging sectors. Only through this goodwill effort can sustainable growth be achieved – and investors are responding to this bold strategy. This is one of the most advanced efforts necessary for the energetic transition to occur: the global food industry is worth above 12 trillion dollars. Only the heaviest investment funds can get the ball rolling for the green revolution to happen. In September of 2021, this strategy was once again enacted, with the buyout of Florida foods.
More recently, Ardian has closed the loop by raising over a billion euros to invest in environmentally sound and sustainable buildings. Environmental and Social governance requires that a comprehensive approach be adopted while investment targets are chosen, and that balance be preserved. What good is it to society if food sources are secure and stable, if its population is otherwise harming its environment through poor housing standards. In this respect, Ardian has chosen to tackle the real estate sector, to prime the energetic transition in this field too. Stephanie Bensimon, the head of real estate at Ardian, says: “Tenants are increasingly demanding high-quality and green spaces in strategic locations with strong sustainability credentials or what we call Green+ buildings.” Sensing a demand from the public and a long-term interest for society as a whole, the decision to set up the 1.2-billion-dollar real estate fund was obvious.
Ardian, in a way, is doing little more than pushing sound investment logic to its next level. For centuries, investment professionals have tried to avoid falling into the trap of promising short-term opportunities. These “quick wins” often spell doom for the investor, as the rapid earnings will quickly be erased by the liabilities which ensue. Energetic transition is a must, twofold, according to Ardian’s strategy: it ensures capital isn’t dissolved in investment mirages, and it guarantees value isn’t lost because it no longer has an environment in which it can bear fruit. Even more interestingly, Ardian seems to consider that environmental protection and social governance are two sides of the same sustainability coin.