Synova has enhanced its ESG capabilities both within the firm and through partnerships to better achieve its responsible investing goals
Meeting commitments to sustainability and ethical standards while achieving alpha for your investors can be an intricate balancing act if you truly see both as priorities
Speaking to Ben Snow, managing director of Synova, at the firm’s Fitzrovia office, it is clear how much thought and analysis the growth-focused private equity firm has undertaken in its efforts to achieve both goals.
Snow oversees Synova’s portfolio operations and value creation activities. When he joined the firm in 2020, a component part of his role was ensuring sustainability, and what the firm labels ‘responsible investing’ was firmly embedded in its value creation efforts.
“Synova’s responsible investing strategy prioritises value creation through partnering with management teams and leveraging our own capabilities to support portfolio companies in developing their own sustainability agendas,” Snow explains.
He is keen to highlight Synova’s long-term sustainability commitments, having been a UN PRI signatory since 2015. “Ambition, innovation and forward-thinking run through our DNA, whether that’s from an origination perspective, portfolio management or any other part of what we do, including responsible investing.”
The choice to use the term responsible investing rather than ESG is deliberate. The firm sees ESG sitting within responsible investing, which is intended to reflect all activities that contribute to the way it partners with management teams.
In recent times, Synova has doubled down on this strategy by enhancing technical expertise both within the firm and through partner organisations.
Crucially, in early 2024 the firm hired Jihea Kim to lead on sustainability and responsible investing. She joined from PE firm Bridgepoint where she was senior ESG manager.
“The key pull factor to joining Synova was the chance to sit within the value creation team, signalling how the firm sees the role, i.e. not solely through a reporting and compliance lens, which is important, but also through a commercial and value creation lens,” Kim explains.
Evolving responsibly
As Synova has grown, the role of supporting its portfolio companies meet sustainability objectives has evolved and expanded. The firm is currently investing its €1bn Synova Fund V, which is targeting businesses across the UK and Europe that range from £20m to £250m in size.
This variety in portco size and maturity makes Kim’s role crucial. “Given the range of business sizes we partner with, we often see that teams are at different stages on their sustainability journeys,” she explains. “Being able to provide my time and expertise to our portfolio companies is really valuable to them in ensuring that we can tailor our support to their individual aspirations and goals.”
All prospective investments are vetted against the firm’s responsible investing policy, at first with a risk lens to identify any red flags, which are noted at the investment committee. For firms that satisfy that initial assessment, a baseline position is identified and progress on any existing sustainability programme assessed.
Ben Snow, Managing Director, Synova
Snow explains how the collaborative effort to align with management teams on their sustainability journey and goals sits within the manager’s wider growth objectives. “We want to partner with management teams that have a growth mindset because that aligns with how we think. We want those management teams to be naturally inquisitive, driven and excited by growth,” he explains.
A key component of Kim’s work is Synova’s annual sustainability survey, where portfolio companies are required to report on more than 65 sustainability metrics. “This feeds into a Sustainability Maturity Assessment and one-on-one discussions I hold with each portfolio company on their performance,” Kim says.
She stresses that these discussions are data-led and focus on areas such as GHG emissions and cybersecurity that Synova’s responsible investing strategy prioritises. Kim says: “These sessions have been really impactful, helping teams focus their efforts and prioritise their resources. In addition, the anonymised benchmarking across the portfolio has created some friendly competition between portfolio companies.”
Rafting up
While Kim’s appointment has enhanced internal capabilities, Synova has also looked outside the firm for assistance with supporting its responsible investing strategy.
In recent years, Synova has worked closely with Flotilla, a net-zero consultancy founded in 2019 by former partner at Northedge and Phoenix Equity Partners John Rastrick. Flotilla offers private equity and asset management firms a proprietary technology platform and consultancy to help them embed net-zero and ESG strategies into their business models.
Both Kim and Snow highlight how mutually beneficial the partnership with Flotilla has been, with Synova providing insight into the needs of PE firms and receiving assistance to remove friction in data collection and enhance its analysis of that data.
“At the outset of our partnership, Flotilla was a reasonably nascent and developing business but it was a technology platform we saw a lot of potential in,” Snow explains. “It resembled the type of business that we like to partner with: a software-based tech platform that is data driven, has a great culture of people, and is highly collaborative.”
As part of the partnership, ESG data from Synova portcos is now posted on a cloud-based portal that provides real-time data, helping the manager appraise those companies in terms of their maturity.
