The stakes of doing business are higher than ever before due to ongoing and overlapping global shocks that are disrupting economies around the world. While the current uncertain situation may be unnerving, businesses must maintain their focus on achieving their environmental, social and governance (ESG) targets. Doing so will ensure robust and resilient social and economic outputs that do not compromise the needs of future generations and may unlock value accretive opportunities that contribute to a new sustainable economy.
At Ata Capital, ESG is part of who we are and what we do as a fund manager and is therefore seamlessly embedded into our investment process. Our commitment to ESG goes beyond mere compliance to ensure that our investments deliver tangible and sustainable outcomes for society, communities and the environment.
Because we understand the value of adopting a strong ESG ethos not only in our business, but also in our portfolio companies, we have recently updated our ESG policy to ensure that these standards become the overarching framework that informs the strategic thinking of our entire firm and our investment process and that these benefits cascade down to our portfolio companies.
Our ESG ethos is fundamentally integrated into our business model and the business models of our portfolio companies and provides us with the blueprint for how businesses should be run on a day to day basis. By holistically integrating ESG outputs across all facets of a business, one can better manage risks and protect value, while also creating new opportunities to unlock meaningful impact and value creation drivers.
When reviewing our ESG policy, we combined the highest investment governance and ESG best practice with what we identified as imperative for our investment partners and our portfolio companies while taking into consideration the macro-economic conditions that exist in South Africa and created a realistic ESG policy blueprint for ourselves.
Our revised ESG policy now also ensures that our ESG standards are more closely linked to the universal economic, environmental, and social targets of the United Nations’ Sustainable Development Goals (SDGs). This is to ensure that we are well placed to invest in projects, companies and economic sectors that contribute to achieving the SDGs and achieving meaningful, sustainable, and inclusive growth within South Africa.
A new niche for private equity in South Africa
Our ESG policy, which is informed by our fund management philosophy, seeks not only to deliver superior investment returns, but also to deliver value for impact-focused private equity investors who understand and appreciate the developmental challenges within South Africa’s socio-economic landscape.
Because Africa is currently only partially on course to achieving just a handful of the SDGs, our investments aim to create meaningful impacts within our portfolio companies that have long-lasting positive outcomes on the growth and sustainability of South African economies, communities, and the environment, as informed by the SDGs.
The impacts that we help our portfolio companies to create are meaningful in many ways: Meaningful to individual staff members in positively transforming their roles within the business; meaningful to communities in helping to change people’s economic circumstances; and meaningful to the environment in ensuring that their operations reduce harm to the environment by adopting sustainable business practices.
In the context of South Africa’s challenging socio-economic environment, one of the biggest hurdles that small and medium-sized businesses in the country face is accessing the required finance and support needed to unlock growth. We believe that private equity investment management firms such as Ata Capital play an important role in this. While we provide a much-needed capital injection into these businesses, we also become a long-term partner in these businesses by leveraging our knowledge and experience to help, support, manage, guide, and ultimately foster the growth of these businesses.
With funding in hand, another hurdle that businesses will face is how to successfully navigate ESG compliance and performance requirements. We therefore assist our portfolio companies, particularly our small and medium-sized businesses, with the necessary guidance on growing their business through the adoption of a holistic approach to ESG. This approach goes beyond the mere identification and management of risk, but rather aims to identify value-creation opportunities and create meaningful impact within the business, for its employees, and within the areas and communities in which the business operates – which in turn helps to achieve organic positive impact directly linked to the SDGs.
In doing so, we are intentional and hands-on throughout the investment process in driving change and transformation within our portfolio companies by being actively engaged in the inner workings of the company and having a seat at the table to drive strategic initiatives. This allows Ata Capital to hold itself accountable for driving improved ESG performance within portfolio companies.
Big picture thinking
Upholding ESG standards and achieving the SDGs requires commitment and dedication, both from the fund manager and the portfolio company. This is testament to the importance of developing a long-term and transparent partnership built of trust.
This trust allows our portfolio companies to feel comfortable enough to be open and honest about their business processes – including current impacts and areas of improvement – during the ESG due diligence process, which take place prior to any investment being made. This level of trust and transparency enables Ata Capital to create a proactive ESG approach that ensures meaningful impact over the life of the investment.
Some of the areas of most significant impact within our portfolio companies have been within their immediate spheres of influence – the communities and areas surrounding their operations – by some of South Africa’s most pressing development challenges including inadequate infrastructure, health and wellbeing, financial inequality, poor levels of education, and gender inequality, besides others.
In addition to that we also focus strongly on the upstream and downstream impact of our portfolio companies and how to help minimise negative impacts and maximise positive impacts.
Ata Capital is a 100% black-managed, majority black-owned and majority female-managed investment firm with a Level 2 BEE contributor status, which gives the company a unique understanding of South Africa’s socio-economic landscape. This has shaped the way we advise our portfolio companies to ensure that our investments meet our growth and transformation mandate. Despite our group of differing portfolio companies, there is a golden thread among them in terms of their risks and their spheres of impact, solely owing to the developmental challenges that they face – challenges that we see as opportunities to deliver substantial value for impact-focused investors.