In a recent fireside chat, Coralie De Maesschalck, a partner at Cartesia and head of ESG, delved into the intricacies of implementing sustainability and ESG (Environmental, Social, and Governance) strategies in private credit. The discussion highlighted the evolution of ESG within Cartesia, emphasizing its transition from a part-time endeavor to a dedicated full-time team due to regulatory pressures, investor demands, and a genuine commitment from portfolio companies.

Key topics discussed included:

ESG Team Development and Importance: Coralie discussed the growth of Cartesia’s ESG team, which started with her and has expanded to three full-time equivalents. She underscored the necessity of having a dedicated ESG team for asset managers today, driven by regulatory frameworks and investor expectations.

Integration of ESG in Business Operations: The conversation touched on how Cartesia integrates ESG demands from investors, regulatory pressures, and portfolio company interactions into their sustainability philosophy and strategy. Coralie highlighted the importance of leading by example and ensuring that their internal practices align with what they expect from portfolio companies.

Practical ESG Initiatives: Coralie provided concrete examples of ESG initiatives at the portfolio level, such as launching carbon reduction programs and assisting companies with compliance to new regulations like CSRD (Corporate Sustainability Reporting Directive).

Role of External Consultants: The use of external consultants for specialized tasks like carbon footprint assessments was discussed, emphasizing the collaborative nature of the ESG industry.

Documentation and Due Diligence: Coralie explained how ESG and sustainability parameters are integrated into the documentation and due diligence processes before acquiring companies, highlighting the shift towards more comprehensive ESG integration over the years.

Regulatory Impact and Future Outlook: A significant portion of the discussion was dedicated to the impact of regulations like SFDR (Sustainable Finance Disclosure Regulation) on their operations, noting that regulatory compliance currently occupies about 50% of their ESG team’s time.

Investor Interactions and ESG Prioritization: ESG topics are among the top concerns for investors, though not always the first question asked. Coralie discussed strategies for engaging investors who are less oriented towards ESG.

Global Perspective on ESG: Differences in ESG emphasis between Europe and the U.S. were briefly touched upon, with Coralie noting that European companies and investors are currently more advanced in integrating and prioritizing ESG factors.

This comprehensive discussion not only shed light on the practical aspects of implementing ESG in private credit but also underscored the growing importance of sustainability across all facets of business operations and investment strategies.

Key timestamps:

00:09: Introduction
00:37: Evolution of ESG at Kartesia
01:41: Importance of ESG Teams
03:09: Incorporating Demands and Interactions
05:30: Initiatives with Portfolio Companies
08:08: Use of External Consultants
09:00: Collaboration and Competencies
09:51: Recruitment for ESG Compliance
10:13: Inclusion of ESG Parameters
12:14: Changes in Due Diligence
13:47: Impact of Regulation
15:30: Focus on Investors
16:21: Convincing Non-ESG Oriented Stakeholders
18:16: Positive Engagement with Companies
20:19: Challenges and Convincing
20:42: Europe vs. US Differences
22:33: Harmonization and Reporting
23:37: Regulation and Collaboration
24:16: Ideal Job Scenario
25:01: Future Tasks and Roles