In a recent ION Influencers Fireside Chat, Danny Vroegop, Chief Investment Officer at Colesco Capital, shared his insights on sustainable private market investing, highlighting the importance of thematic focus, rigorous sustainability assessments, and collaborative partnerships with private equity firms and management teams.

Key Takeaways:

• Thematic Focus: Colesco Capital focuses on three key themes: sustainable food transition, energy transition, and inclusive society. These themes guide their investment decisions and allow them to build expertise and networks in these areas.
• Sustainability Assessment: Vroegop emphasized the importance of assessing a company’s sustainability ambition and willingness to make changes. Colesco Capital’s responsible investment framework ensures that their investments align with their sustainability goals.
• Partnerships: Vroegop highlighted the importance of collaborative partnerships with private equity firms and management teams. Colesco Capital works closely with these partners to identify opportunities and support companies in achieving their sustainability goals.
• Deal Sourcing: Colesco Capital sources deals through a combination of proactive outreach and reactive responses to opportunities presented by their network.
• Sustainability-Linked Loans: Vroegop mentioned the use of sustainability-linked loans as a tool to incentivize companies to achieve their sustainability targets.
• ESG Concerns: Investors are increasingly concerned about greenwashing and impact washing, and Colesco Capital prioritizes transparency and rigor in their sustainability assessments to address these concerns.
• Market Trends: Vroegop is bullish on energy transition and sustainable food transition, citing their potential for significant impact and growth.
• Platform Deals vs. Buy and Build: Colesco Capital expects to see more buy-and-build opportunities in the next two years, as companies seek to scale and expand their sustainability initiatives.
• Sponsor Activity: Vroegop anticipates that sponsor-backed deals will remain the majority, but non-sponsored deals will continue to play a significant role in the market.
• Macroeconomic Trends: Vroegop expressed concern about the potential impact of global trade tensions and supply chain disruptions on international companies and their sustainability initiatives.

Key timestamps:

00:09 Introduction to Sustainable Investing
00:39 Overview of Colesco Capital
01:20 Danny’s Background in Capital Markets
02:14 Assessing Sustainability Ambition
03:28 Workflow in Sustainable Financing
04:51 Thematic Organization vs. General Expertise
06:07 Transaction Volume and Diligence Process
07:07 Identifying Red Flags in Financing
09:48 Sustainable vs. Non-Sustainable Lending
11:28 Future of Sustainable Credit Investing
12:28 Sustainability in Mid-Market Corporates
13:50 Role of Private Debt Investors
14:58 Incentivizing Management Teams
16:34 Investor Concerns in Private Credit
17:33 Assessing Sustainable Investments
18:22 Aligning Data Reporting Standards
18:55 The Evolution of Reporting and Trust in Investments
19:33 Market Trends in Sustainable Themes
20:19 Future Trends in Private Credit Deals
21:10 The Future of ESG Leadership in Firms
21:54 Macroeconomic Trends Impacting Investments
22:38 Conclusion and Final Thoughts