Hello and welcome to the latest episode of Real Deals as private
Equity talks podcast. I'm Talia, Emissary editor of
Real Deals and I'll be co-hosting today with our
features editor sound virtual. During today's chat, will be
looking to dissect a new theme in the industry.
That is known as the just transition and how it is being
used in practice to do this, we have Michelle giddens, co-ceo at
Bridges Vonda management and Sharon Johnson cro of agility
Eco, a Bridges portfolio company.
Hi everyone. Thanks for joining us today.
Nice to be here. Great, thank you.
And so I'm excited to get stuck into and then the concept of the
just transition first, and to set the scene for our, or our
listeners, and Michelle, for those of our listeners, who were
at the Real Deals and drawdown ESG conference Couple of months
ago would have had yourself and Sam discuss the dress transition
and but maybe to set the scene once again and from your
perspective kind of as an investor.
How would you describe the concept of a just transition?
Thank you, Dalia. Yes, look, I think this is the
next wave of thinking in terms of sustainable investing and
fortunately, many more investors are these days thinking About
climate impacts in their Investments, and making NetZero
commitments. And that's incredibly important.
And the latest ipcc report as you might have seen suggests
that the investment in the shift to a low-carbon world is about
six times lower than it needs to be.
So thinking about the climate in Investments is incredibly
important and really a just transition takes this.
The next level, it's about ensuring that the benefits and
the costs of transitioning to a green economy are distributed
widely and are distributed fairly.
So it means that when we think about environmental
sustainability in choosing Investments and how we run our
investments. We also think about what that
means for social inclusion, decent work poverty, eradication
means and I think this Is so essential because if we don't as
an industry and as a as countries, bring people with us
in this transition, then we may not only his hat sort of not
fair in the first place but also without it we can't hope to
build the political consensus we need to achieve Net Zero for
Bridges. We use we tend to think about
this as investing in a more In apple and a more inclusive
economy. So reducing our impact on the
planet while also helping more people, fulfill their potential
and building stronger communities.
Professor, Nick Robbins, I just finalized that answer by saying
Professor Nick Robbins at lscc, who really is, one of the people
who came up with this concept for just transition said, if Net
Zero is the what then the just transition is the how I guess
the next question. Michelle really would be.
Obviously you talked about kind of what the idea.
Of the just transition is kind of philosophically.
But what does that look like in practice?
So what sort of tools and measurements and Frameworks can
gp's use? What advice would you have for
them to use where they can sort of measure their just transition
objectives? So, I think a very, very good
place to look. First is a recent report from
the G7 impact investing task force, that looked that
describes three key elements that any investor should be
thinking about if they care about just transition investing.
So first number one, of course is climate and environmental
action. Number two, socio-economic
distribution. And Cootie.
And then number three, Community voice, which really means
thinking as you make an investment, about how you're
going to listen to the voice of the individuals that are
affected by that investment. And those three elements, they
say can be either integrated into individual investment
choices or there's also an option to think about creating
products which are focused on the just transition and that are
deliberately seeking out Investments.
Using those three tools. Another way that we like to
think about it, we've always used the UN sustainable,
development goals in are investing.
And, of course, they also represent quite a strong sense
of the just transition, particularly the goals 8, decent
work for all seven clean energy for all 12 responsible
consumption and production and then 13 climate action and And
go number one poverty eradication, so at Bridges and
when we look at an investment, we develop a core impact thesis
and that thesis must either, have a strong environmental
Dimension, or a strong inclusivity that mention.
And of course our Bullseye, if you like, in terms of impact
pieces, would combine both positive impact on on?
On planet and inclusivity and actually the example, we're
going to talk about agility Eco is a really good example, where
it does both relate to inclusivity as well as 222
Planet related things. Okay.
And I feel like that is a perfect segue then perhaps to,
to introduce Sharon. So we've obviously heard from
the investor site how financial institutions can integrate the
social Dimensions. The way they allocate capital
for Net Zero and what that process looks like.
But now let's hear from the portfolio level.
So Sharon, it would be great to get your perspective on what
it's been like to be on this just transition Journey.
So first, if you could tell us a bit about agility, Eco what it
aims to do. And yeah and how your
partnership with Bridges began. Yeah, that's great.
Also, I'm a fairly recent starter a jersey, but actually
the company was launched in 2013 and the thing I love about it is
it has a really unique proposition around fuel poverty.
So we combine supporting vulnerable customers and
providing all kinds of support, our own Financial advice, and
support and also Energy, Efficiency, retrofit measures to
improve the quality of their home.
Both from a kind of heat and comfort perspective, but also
obviously from the cost perspective, - so what we're
about is we want to play a major role in eliminating fuel
poverty. We want to do a great job for
those customers that we help and we want to contribute to Net
Zero. So what how that shows up in
practices, we really, really understand how to help
vulnerable customers. We have a large number of people
that are either working in vulnerable customers homes,
giving them help and support or on the phone to them providing
advice. We have Great relationship with
a number of organizations that help identify customers that are
in need. So that's Charities.
Local authorities and energy suppliers, and we have access to
a large network of installers, who can go into customers homes
and fit, insulation and heating to make their homes better, and
we have a great reputation actually for delivering Energy
Efficiency programs in a really efficient way.
So that's that's agility. Eco it in terms of the
relationship with Bridges back in 2019, you know, it's when
jealousy was already strongly in that that mission and that
mindset, but it had grown quite rapidly and very successfully
from a start-up and needed, help and support from an investor to
continue to expand its services to become a little bit more
professional little bit more industrial strength.
And that the founders were looking for an investor with
similar values and sort of a social impact.
Vsauce. So that funding from Bridges,
was announced on the 20th of November and you board and chair
put in place. And since then really the
company has gone from strength to strength, despite happening,
you know, just as covid out to hit, there's been expansion on
all fronts and we've built a couple of new business lines
into the company. So it's been a very successful
partnership. Yeah.
It sounds like a really incredible business and you
mentioned you were sort of prior to your investment with Bridges.
You You were already perhaps in this, just transition mindset.
But were you aware of that concept before your partnership
with Bridges and where the elements of the just transition
cup already within your business?
I guess, prior to this partnership and investment.
Yeah, I think less expressly aware more.
It was just what the company was about and they're to do, so, the
fit was already there. So I Manifesto is about securing
more money for Energy, Efficiency, upgrades for the
fuel poor, and making sure that it's Absolutely.
The best way it can be about partnering with local
organizations to, you know, have a win-win relationship.
And to make sure that all of us, vulnerable customers can get
help. So, you know, in there, you can
hear a lot of alignment with what we were just talking about.
So in terms of how that how we work, that shows up with us
being incredibly, highly networks, with partnering with
local authorities with installers with energy,
suppliers and with charities, He's and delivering advice to
local third sector agencies. So, for example, we supported
757 jobs last year, and local companies and social
Enterprises. So I think that gives us Stand
Out, expertise with the vulnerable and the fuel core.
We touched 45,000 customers lives in our community since
business unit last year's, and that is life-changing for some
of those customers. So there's a good alignment that
I think. Yeah, absolutely.
And Michelle just coming back over to you briefly.
So from your perspective as an investor coming in what sort of
opportunities for growth? Did you identify so prior to and
then during your investment in energy agility Cohen and kind of
perhaps using that transition learns well and our really
strong conviction. Is that companies that are
responding to these macro challenges like the me need for
greater sustainability like the need for greater equity and a
greater inclusion. Are likely to be the companies
that are going to grow among the fastest in the economy.
I think you can really hear that from Sharon.
So we were very attracted to agility Eco because we felt that
its growth potential was going to be enormous as well as having
a very positive impact on people and planet.
And You think today about the challenges that are being faced
in terms of fuel poverty? There are, of course only there
in the news all the time. Now particularly with Ukraine
situation. So this is a challenge that it's
becoming and has become even more at the Forefront of
people's minds. So we saw a company that was
doing its work extraordinarily well and had huge growth
opportunities. But like all the companies that
we work with there were challenges that they wanted to
work through and we thought we could could bring support to
them so it's scaling existing Services diversifying services
that we've been looking at incorporating remote telephone
service, provision better tailored services such as help
Hub. It's about in we've worked with
them to improve organizational capacity so we had with them and
you chair and UCS. Oh and you clo being Sharon and
then of course as with every investment that Bridges makes
Always looking to try to bring support to them in terms of the
way that they measure and communicate their impact on
society which in turn delivers them additional competitive
Advantage because their customers and their other
stakeholders are more clearly aware of the positive impact
that they're having. Sure, absolutely.
And I want to talk a bit about some of that measuring Concepts
so she's sharing obviously, we've spoken a bit about sort of
the the focus that agility. He has on Energy Efficiency and
I think quite a lot of the time companies, do tend to focus on
that kind of measuring the CO2 and such.
And that's perhaps a bit kind of something.
That's a bit easier for people to focus on.
But I want to turn now and look at that.
How you measure the social impact?
Yeah. How do you do that?
And what kind of challenges are around that?
So, yeah, I think this is an area where Bridges have
particularly helped us lift this, this are impact out.
So if, for example, we made 200 million pounds of interventions
in 2021, and that's about 7,000 pounds per household in lifetime
savings on their energy bill. Which if you put that in context
of today's world with the energy prices going up the way they
are, that is hugely impactful and also on Health and Care.
Comes we delivered 9.5 million pounds of Health and Care
outcomes last year. And so I think we're Bridges
have really helped us is to bring us that that focus and
ability to measure impacts in that way which we probably
wouldn't have done previously. And I think you know, it for me
as a CEO of how that shows up it in real life is the customer
experience. So I wanted to just talk about
mr. Bumstead who you helped him as
referred through our Portsmouth City.
All to our leap advice scheme, mr.
Baum says an elderly man, he lived alone in a park home.
He had ill health, he wasn't receiving any benefits at that
time and he was struggling with the cost of heating his home and
we were able to provide him with the best connection worth two
and a half thousand pounds. Some heating were 3,800 pounds
and insulation and work to his home, to improve it worth 11,000
pounds, and that showed up, as 40,000 pounds in lifetime Bill
Savings, Mr. Bond, Stead and still a load of numbers, isn't
it? But actually when you receive
the emails that we receive from customers and their relatives
saying, you know, you have changed my life.
I now feel better, my health is better.
I'm not feeling anxious that's where this stuff really shows.
The impact, it's having. All right, so Sharon for you,
since the investment, could you talk to us a bit about how
you've been working with Bridges and particularly what changes
have been made that are really driving.
Diving the just transition since your partnership.
Yeah, I think I call out two things, really?
But first is that we get great advice and support a challenge
from Bridges and our board. And that's incredibly helpful
and secondly, the focus of the structure around impact and
Reporting has just bought it, you know, in to clear a relief
for us. So, on the first of those, I
think, you know, the challenge and support front, it helps is
generally more effective. So there's been a lot of Around
have technology and how we use data approach to Quality making
us more efficient as an organization, since the
investment and on organizational maturity, how we develop our
people and give them a great career paths through how we
become more diverse and more inclusive.
We've introduced an employee ownership scheme through
Bridges, very good advice and and we're getting great support
on our application to become the corpse.
If I'd and the we also get brilliant strategic advice.
So the outer investment around heat pumps is been fully
supported by Bridges. And as we've discussed in
progressed, it through our board.
So general advice and support is fantastic.
But secondly, the focus on the structure of how we report on
impact is important and aligning our goals to the sustainable
development goals. In particular, the ones that
Just transition. So for example, on gold can
Prime action, lots of the work we do is fully aligned to that
making homes more efficient. So we delivered five hundred
forty five thousand tons of Lifetime.
CO2 abatement in tier 2221. It's gone bold 10.
Reducing inequalities. We support customers with advice
and other measures so Community. Schemes, business unit, for
example, provides Many more customers with advice and
support than the ones that end up getting the retrofit changes
to their homes. So, that delivers about an
average reduction in the fuel poverty Gap, where tube last
year was two hundred and fifty one percent, and I'll go late
decent work and economic growth. I've talked a lot about how we
network with installers and other businesses and how we can
help them be successful as well as ourselves and On 7 affordable
and clean energy. Lots of the scheme's.
We're driving delivering solar panels, three examples and heat
pumps, which are going to become enormous round.
We're investing enormously. And so, I think that structure,
it makes us feel great as an organization and it shows that
we're the things we're doing, are you know, positive
obviously, having such a session in such an integral part of
agility ecos. Strategies is to stay tuned.
In and connected to the needs of those communities that you're
aiming to help. And it seems obviously, as you
mentioned, it seems so incredibly topical right now
with the energy crisis and everything and then and the
currents of living crisis that were also struggling with.
So my question is, I guess how do you ensure that your
remaining, well, informed about the communities that you are
serving and how is it, how does that sort of fit in with your,
with your business strategy? Yeah, I think a business
strategy. Is to work very closely and to
be fully integrated with a large network of different
organizations and with consumers.
So as I described we're doing work for a number of councils
and funders and obviously they have their own specific issues
and we need to talk to them and understand that.
So working with a local Council in the Southeast might not be
the same issues result because one in North, we work closely
with a network of installers and it has to be a value exchange
between us and Them. And a win-win relationship.
So we're very hard to understand what's important about those
businesses and how they can keep their businesses running work
with Charities and other referrers.
So they obviously are very, very close to what's going on on the
ground for consumers. We work with consumers
themselves, obviously, talking to them, through our call
Centre, which we showed us talked about, we've been able to
expand and through our home energy advisor Network and we
talked to energy suppliers who obviously have the best possible
View at the moment about how consumers.
There's a feeling and some of the challenges they're facing,
so I think that if we didn't do that, we would be not having the
edge that we do have which we are able to tailor what we do to
the specific groups of customers that we need and that is why
we're so successful. So an example, I would draw out
now as we've just made an investment in Alto energy who
are Specialists heat pump provider.
Obviously this is a important Oughtn't, you know, move from
away from gas heating towards heat pumps.
It's essential. We've got high number of targets
to hit in the next few years. And the rapper we're putting
around that is to make sure for vulnerable customers one that
they understand that the likely change to the heat experience
that they get from heat pump and it to their energy usage and
that we take them through that Journey because they need much
greater support for example than able to pay customer whom they
researched it. Would have.
So, you know, that's a whole ethos is around understanding
what being consumers really want, and making sure that,
although, some of this work is funded through public money.
They still feel like they're in control of it.
Yeah. Ensuring say, ensuring that you
sort of always always stay connected to the to the
customers that you're serving. Really.
Yeah, I guess that's, that's kind of huge and Sharon to kind
of see that that impact And then clearly kind of the with the
amount of customers you're serving as well and at the
moment that's always is clearly very crucial and perhaps even
more important in terms of what you're doing and the societies
that you're helping, okay? And then kind of looking at more
broadly once again Michelle from your perspective.
So we can have seen and heard about how you've worked with
with Sharon Angela Tek and that from the perspective of maybe as
an investor to give give advice to your fellow GPS, a out there
in terms of how they can best engage with their portfolio
companies on the just transition.
And how do you advise firms to go about kind of considering
this? Ultimately, we are all investors
and we're looking to invest in companies that can deliver
attractive and sustainable Financial returns to our
investors. And so what we've what we hope
to do, with all of the companies that we work with is to identify
those win-win opportunities. We're taking decisions that That
are more inclusive, taking decisions that are better in
terms of the planet can also transform, the commercial
success of the business. And I hope that's what we've
been able to do with agility Yuko, which for example, as
Sharon said with work with us, has now produced an excellent
impact report, which I believe and Sharon could probably
confirm this or not. Is one of the it is one of the
elements that has helped to transform.
Form. Also their commercial success
and so supporting greater transparency, transparency and
accountability, we believe in turn can support stronger
commercial and and and investment growth.
And its really finding those opportunities.
Those win-wins that can help companies to understand why this
is important for them, as well as for the investor.
Definitely, definitely. And I guess I'm just going to
follow up to that in terms of we're still clearly at the early
stages. Well, obviously not for Bridges
and gents UK, as well as we've discussed.
A clearly already kind of in integrating aspects of the just
transition into the business. And of course bridges are
looking across your portfolio about how you can help the
portfolio companies. And but for the investors, I
assume it's still quite an early Concepts.
Bill and the LPS, especially in terms of them understanding the
benefit of this type of investment.
And so, is that something you've had to kind of communicate more
clearly to your old piece? Is it something that they're
interested in learning more about, or is it still kind of
early stages that if an interesting question, Talia?
And because for us both into inclusivity, the social
dimensions and the Is it true Dimensions have always been part
of our 4p impact things that are around elf and around community
and around education and around sustainable living.
So, for our investors, the inclusion of both, social and
environmental factors has always been a part of reactive
thinking, however, this concept of the just transition and more,
which is now being covered in places like I do.
Talked about the G7 report but also is a core part of.
I think it's at least a quarter of the government plans for
climate change. And it's also very notably a
concept captured in the Paris agreement.
So it's something that I think investors are beginning to hear
more about. And if you think about yourself,
if you are, for example, a fiduciary, investor a pension
fund. And thinking about the long-term
needs of the pensioners that you serve, then the transition to a
green economy is crucial for them but so also is very
inclusion and the equation of their of their get their
children in this in this transition my view and perhaps
Michelle tell me if I'm wrong here and obviously not all
companies no portfolio companies are going to be as well suited
and kind of have those synergies said And of nicely fit into the
just transition. And so kind of what would you
say? Some of the main barriers for of
the just transition kind of for some GPS and their portfolio
companies? Yeah.
Thanks Natalia. No, as we discussed, It's A New
Concept. So the relatively New Concept.
So that's what, in a way, the first barrier, and I think the
reality is that a lot of companies, lot of investors are
mainly focused at the moment. If they're focused at all on
carbon accounting, carbon reducing carbon, which is
fantastic, but going beyond that and thinking in the investor
strategy about whether there are ways they can invest that, With
inclusivity and that transition is is a next step.
And I think there are two ways of thinking about it as an
investor one is thinking about it in terms of your wider
investment strategy. So what sort of companies are we
invest it? Or we interested in selecting
and whether we want to whether you want to think about
inclusion creation of jobs in the green economy, as well as
the question of reduction of carbon and then the And question
that you asked Antalya is more at the portfolio company level
once you've already made the investment.
And there it's really a question of thinking about the impacts of
those companies not just, you know, beyond carbon really
thinking about the impact, the company's first be in terms of
their a reduction of carbon then also, in terms of inclusivity
job quality and those other considerations.
What are the barriers? You know, always a barrier is a
lack of Did metrics, which is why I think it is exciting that
the G7 would come up with this recent report that I think it's
worth worth looking at that social impact report, because
it's seeking to set a series of principles for just transition
investing, which will help investors to think in a more
systematic way about how they, how they consider all factors of
a just transition. Sure, sure really interesting.
And, and that brings me onto kind of the final Point Michelle
around - what's up what kind of support and regulations are
available or is needed in your view from the government to kind
of help towards this this progression and this just
transition I guess for me the role of government is to is to
catalyze its to create a supportive policy environment
for Investments that are promoting sustainability.
And promoting the just transition part of this is a
regulatory question so helping to provide a clearer Baseline
and requirements for Good thing that will reduce the the
uncertainty about what what standard metrics should be.
I think thinking about more work on fiduciary duty and
incorporating the just transition into the fiduciary
duty duty of investors. And I think ultimately the last
thing maybe I would say is that, although Policy can help
enormously the challenges that we Face are immediate, the
urgency of the need to progress to NetZero.
You know, we need to see a turning point by 2025.
So, I would urge investors not to wait to be told by a policy
makers, but to start thinking about those issues now,