Firm profile: Earth Capital on the recognition that ‘life has to change’ post-Covid

The latest developments at private equity firm Earth Capital, its investment processes and how ESG has become a 'necessity'

Earth Capital, the private equity business that only invests in sustainable companies co-founded by Stephen Lansdown, has extended the equity ownership of its business and restructured the European investment team.

In response to soaring demand for impact investments, Lansdown and co-founder have invited the senior team of Phil Culver Evans (CFO), Richard Burrett (CSO) and Neil Brown (CRO) to all become shareholders, whilst remaining majority owners themselves, in order to further the group’s growth and ensure the firm is well placed to support companies as they ‘build back better’ from Covid-19.

The decision has also been taken to increase investment in the European part of the business based in Barcelona, formerly Si Capital but now branded as Earth Capital Europe, which is majority owned by Sebastian Waldburg and Eusebio Guell.

Nick Curtis, current director of investment, has been appointed chair of Earth Capital’s newly created waste to energy portfolio company. Furthermore, the group is concentrating on bringing efforts in the Europe and UK together and has appointed two new investment directors, Avent Bezuidenhoudt and Dr Simon Crook. Based in the UK, the pair will join CIO Gordon Power and investment associate Joshua Hope in selecting new technology investments in the sustainable sector for the Nobel Sustainability Fund.

Bezuidenhoudt was most recently senior fund manager at FSE Group and has over 25 years of experience in investment, portfolio management and corporate finance advisory, while Dr Crook, has previous experience in impact investing at Greensphere Capital, where he was an operating partner, and has also worked in senior roles at Grant Thornton and ExxonMobil.

CIO Power told ESG Clarity: “With the sustainable issues we are facing worldwide, we believe that pulling together our team is the right thing to do going forward.

“Sustainable finance will play a crucial role in driving a green recovery following Covid-19 and we believe that these changes will position us well for the future.”

See also: – How can pension portfolios protect against the climate crisis?

Background

Established in 2008 by Lansdown and Power, Earth Capital has been building a track record investing in venture capital, growth capital and infrastructure putting sustainability at the heart of its investment philosophy from the get-go.

The private equity firm invests globally in the development and deployment of clean sustainable technology, centred around three investment themes; energy, water and food security.

“These are all fundamentally challenged areas for the future development of the planet. We target positives impacts here and ensure the businesses are sustainable too.”

The Earth Capital team has developed its own proprietary tool, Earth Dividend, which scores companies using 30 tests over five ESG dimensions to understand the contribution of an investment asset or investee company to sustainable development.

Each test is rated +1 (positive), 0 (neutral) or -1 (negative). The individual scores are added together with the aggregate score reflected on the axis for the relevant dimension of impact to generate a potential aggregate score that ranges from +30 to -30. Earth Capital will only invest in businesses which will have an aggregate net positive impact i.e. +1 or greater and will work with the business to improve its score and therefore add business value.

The current ESG indicators used can be summarised into; natural resource consumption (water use and efficiency, use of raw materials, land resources value), ecosystem services (biodiversity, climate system, greenhouse gasses, soil system), pollution control (atmospheric emissions, waste disposal, supply chain polluting impact), social and economic contribution (employee welfare, human rights, local economic contribution, supply chain employment standards), and society and governance (corporate governance, bribery and corruption, responsible marketing and behaviour, indigenous people and cultural heritage).

The group said although the development of Earth Dividend pre-dates the UN’s Sustainable Development Goals (SDGs), it is closely aligned in impact terms.

Richard Burrett, chief sustainability officer at Earth Capital, said: “Using Earth Dividend, we are able to understand the whole footprint of the business and their contribution to a sustainable world.

“We review results and look for areas where we can work with the company to improve and therefore add value to the business.”

He added the tool helps avoid greenwashing, assists with due diligence and is also a performance management and reporting tool.

One portfolio holding that has an Earth Dividend Score of +16 is Propelair. The company has created a water saving system that injects air into a toilet flush and therefore saving a sixth of the water used by conventional flushes.

 “This scored highly due its reduced water usage and also the energy savings on post-flush water management,” explained Burrett.

He added the Scorecard also identified one of the negative impacts of the company is the use of plastic and ceramics in the products, which have energy intensive and ‘dirty’ procedures within the supply chains. As a result, Propelair’s management has been looking at how to minimise and reduce plastic usage and also procure ceramics with lower embedded energy footprints. It has also improved its supply chain processes.

“It hasn’t been an overnight project, it has taken some time but it has looked at the intensity of its operations, made the supply chain more resilient, become less energy intensive – these are all compelling reasons to invest in this company,” said Burrett.

ESG industry integration

The pair also noted the movement from ESG being a “elective option” and simply the “right thing to do” to becoming “a necessity”.

In the wake of Covid-19 spreading across the world we have seen governments, companies and communities pulling together and there is a “much higher level of understanding and recognition that life has to change”, added Power.

“The companies that carry out ‘business as usual’ have not been as resilient as the sustainable ones. Additionally, more and more countries have recognised how important food and energy security is to them,” he added.

Burrett also noted that companies have realised not only how much environmental issues can have an impact on their business, they are also paying attention to biodiversity loss and the destruction of natural capital.

“This can be equally damaging to the economy and society as loss of financial stability is,” he warned.

 

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Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity and has been an investment journalist for 16 years. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021, and was Winner...