Silva Deželan joined Stafford Capital Partners at a key moment in 2020. The asset management firm was celebrating its 20th anniversary, but at the same time was looking to expand its private equity operations in the Benelux region and further embrace environmental, social and governance (ESG) integration.
Indeed, Stafford Capital Partners announced the acquisition of Robeco’s private equity business in June 2020, in a bid to strengthen its private equity capabilities in Europe and in the primaries sector, as the organisation was mainly focused on secondaries and co-investments. Due to this acquisition, Stafford has opened a new office in Rotterdam, increased its assets under management in the private equity sector by $1.5bn to $3.1bn, and added 11 Robeco staff to its personnel.
Deželan, who served as sustainability director within the private equity team at Robeco, joined Stafford Capital Partners as ESG director. In her new role, she is overlooking ESG integration and engagement on issues with fund managers, ESG assessments and reporting, the UN’s Sustainable Development Goals (SDGs) and impact investing. This will be done across not only private equity in Europe, but throughout all the business lines of the organisation, which also include infrastructure, timber, agriculture and food, private credit, and private equity in Australia and the US.
Climate change is a systemic issue that has an impact on investment portfolios, so we need to address it accordingly.
“With the growth that the firm has experienced over the past year through different mergers and acquisitions, it is key that there is a consistent approach in regards to integrating ESG analysis across all business lines, even though the nature of their assets might be very different,” says Deželan.
Taking Stafford forward on the ESG stage
Within her first three months with Stafford, Deželan had prepared a two-year ESG road map for the organisation.
“Apart from ensuring a consistent ESG integration across all asset classes, we will publish the first Stafford-wide sustainability report in 2021,” she says. “It will broaden in scope compared with the European private equity team’s ESG report, as all business lines will contribute and highlight the most relevant ESG topics and quantitative indicators for their asset class. It is key for the organisation to show what we are doing across real assets and private markets.”
Deželan mentions working towards the UN’s Sustainable Development Goals (SDGs) as another focus for Stafford in 2021. Her colleagues in the US are building an SDG tool that enables different teams to make an assessment of an investment’s contribution to the SDGs. “This project started in 2018 and we are now expanding and improving this tool, as it assists us in measuring our contribution or the contribution of the underlying assets to the different SDG targets,” says Deželan.
Another key issue for asset managers and asset owners is climate change, not only within the EU (due to the upcoming regulation on sustainability disclosure and taxonomy) but also on a wider scale, due to recommendations made by the Task Force on Climate-related Financial Disclosures, according to Deželan.
“As investors we have to do more with respect to climate change-related risks and opportunities, including climate reporting, and building tools to consistently assess the exposure of our underlying assets to climate change risks,” she adds. “Climate change is a systemic issue that has an impact on investment portfolios, so we need to address it accordingly. Stafford has published a strategic position on climate change already in 2019, so this is work in progress.”
On top of coordinating ESG-related activities across five business lines, Deželan also works with support services such as human resources, client solutions and compliance.
“For example, I have worked with the human resources to organise training sessions and help develop some key performance indicators to be included in the annual performance assessments and personal development plans,” she says. Deželan is also chairing Stafford’s seven-strong sustainability committee.
Outlining fundraising plans
Stafford, which has $7.7bn in assets under management and more than 70 employees across eight offices based in Australia, Brazil, Germany, the Netherlands, South Korea, Switzerland, the UK and the US, has recently launched its latest European private equity fund.
The Stafford European Private Equity Fund VI (SEPE VI), which is a fund of funds, is looking to raise €250m, with the first close expected in the first quarter of 2021 and the final close to take place one year later. SEPE VI is set to invest in small and mid-market European private equity funds through primaries, secondaries and co-investments. Indeed, SEPE VI will have a greater allocation of secondary investments and co-investments compared with its predecessors, in an attempt to take advantage of the current market dislocation.
On top of that, an important part of the fund’s strategy is engagement with private equity fund managers on how to build and improve their ESG frameworks.
ESG trends to watch
With the Covid-19 outbreak having a wide-reaching impact across the globe, Deželan says the pandemic is highlighting certain social issues, such as health, safety and working conditions, as well as employee well-being. Another issue being brought forward by the crisis is an increased focus on data privacy and cybersecurity, as the pandemic has emphasised the importance of a company’s digital capabilities.
Deželan says that Stafford intends to give more attention to ESG issues that are relevant for tech companies and software businesses. This comes at a time when there is an increasing number of European fund managers making investments in tech companies, and they are having to show what these investments do in terms of ESG integration, as well as identify material ESG issues in these companies.
Another ESG issue that is gaining the attention of investors is biodiversity, which is especially relevant for the timber, agriculture and food business lines, according to Deželan. “There have been many initiatives lately related to biodiversity, ranging from the Finance for Biodiversity pledge to the Partnership for Biodiversity Accounting Financials,” she says. “It is because there has been a realisation from investors that biodiversity is a very material topic for a number of sectors.”
There are a number of factors influencing and driving investors’ ESG focuses, from biodiversity and climate change to regulation and the Covid-19 pandemic. However, Deželan stresses that integrating ESG analysis into investment decision-making is the key to ensuring businesses and investment portfolios remain ‘future-proof’.