"The Critical Role of Private Capital in Transforming Industries for a Sustainable Future"

" The Critical Role of Private Capital in Transforming Industries for a Sustainable Future \r\n \r\n\r\nThe transition to a net zero economy represents perhaps one of the greatest investment opportunities in modern history.\r\n\r\n \r\n \r\n\r\nWith estimates suggesting a\u00a0 $275 trillion \u00a0opportunity by 2050, private markets are emerging as essential catalysts for this transformation.\r\n\r\n \r\n \r\n\r\nTheir unique governance model \u2013 combining long-term investment horizons with operational expertise and strategic vision \u2013 creates an ideal environment for businesses to accelerate sustainability initiatives while capturing new market opportunities.\r\n\r\n \r\n \r\n\r\nThis powerful convergence of business know-how and the need to scale profitable climate champions is reshaping industries and creating competitive advantages for forward-thinking investors and companies.\r\n \r\n Accelerating the energy transition through business transformation \r\n\r\n \r\n \r\n\r\nPrivate markets are addressing the energy transition through multiple investment approaches, focusing on mature technologies and emerging innovations across the value chain.\r\n\r\n \r\n \r\n\r\nFrancesco Starace, partner at EQT and former CEO of Enel, highlights the opportunities created by technology-driven efficiencies and the need to transform outdated systems:\r\n\r\n \r\n \r\n\r\n\u201cAbout two-thirds of the primary energy the world consumes is wasted. Moving money from operational costs to investments that build infrastructure for the future is a much better bet.\u201d\r\n\r\n \r\n \r\n\r\nThis perspective aligns with what other leading investors are seeing. According to the World Economic Forum\u2019s 2024 white paper\u00a0 Bridging the Divide: Private Markets and New Drivers of Value Creation . When TPG launched its TPG Rise Climate fund, the leadership deliberately structured a suite of value-creation capabilities that would uniquely support Rise Climate companies.\r\n\r\n \r\n \r\n\r\nThese strategies include enhancing go-to-market approaches, optimizing pricing models and implementing greater operational efficiencies. These are all critical to achieving profitable growth, more commercially successful companies and unlocking greater sustainability and decarbonization outcomes.\r\n \r\n Commercial transformation through sustainability leadership \r\n\r\n \r\n \r\n\r\nPrivate equity\u2019s ability to combine financial discipline with hands-on ownership enables companies to align sustainability with profitability. Starace emphasizes EQT\u2019s focus on unlocking value by removing constraints:\r\n\r\n \r\n \r\n\r\n\u201cAfter acquisition, we work together to unfold the full potential of the company by removing constraints like capital limitations and short-term pressures. It\u2019s about asking: \u2018What could this business achieve if we remove those limits?\u201d\r\n\r\n \r\n \r\n\r\nSimilarly, the Forum\u2019s white paper highlights how Permira has placed profitable impact at the heart of its strategic ambitions. The firm has a circa 40-year history of backing secular growth trends and has increased its climate investing activities while building a team to invest throughout the climate transition value chain.\r\n\r\n \r\n \r\n\r\nIts history of making the most of its resources and the expertise of its senior advisers, operating partners and dedicated value creation team to help portfolio companies\u2019 management teams drive growth positions the firm well to be a partner of choice for many climate transition businesses.\r\n\r\n \r\n \r\n\r\nThese strategies include enhancing go-to-market approaches, optimizing pricing models and implementing efficiency improvements \u2013 all critical to achieving financial growth while driving sustainability outcomes.\r\n\r\n \r\n \r\n Unlocking sustainability premium through operational excellence \r\n\r\n \r\n \r\n\r\nAt EQT, active ownership is about reimagining business models, accelerating ambition and building long-term value. Starace reflects on the transformative potential of these partnerships:\r\n\r\n \r\n \r\n\r\n\u201cWe sit together and imagine what this company could do if we eliminated constraints. That process builds an incredible story and accelerates both economic and sustainability performance.\u201d\r\n\r\n \r\n \r\n\r\nThis approach resonates with how other GPs are integrating sustainability into portfolio operations. It involves:\r\n\r\n \r\n \r\n \r\n \t Introducing subscription-based revenue models for greater scale. \r\n \t Branding to ensure customers and future buyers understand the value proposition. \r\n \t Marketing and sales strategies that help companies target more profitable customer segments aligned with sustainability-driven market trends. \r\n \r\n \r\n \r\n Capturing market value through sustainability positioning \r\n\r\n \r\n \r\n\r\nDemand-side shifts increasingly drive the energy transition as industrial and commercial sectors adopt decarbonization solutions at scale. Starace emphasizes the role of electrification in shaping investments:\r\n\r\n \r\n \r\n\r\n\u201cElectrification of final energy use driven by technology evolution is happening and it\u2019s a major drift \u2013 like a big current in the ocean.\u201d\r\n \r\n Embedding sustainability in the equity story \r\n\r\n \r\n \r\n\r\nPrivate equity firms are increasingly focused on positioning portfolio companies for successful exits by embedding sustainability into their core value proposition. The Forum white paper highlights how firms work proactively with management teams 12-18 months before exit to develop commercial, brand and operational proof points around sustainability.\r\n\r\n \r\n \r\n\r\nWhen done effectively, this preparation allows companies to attract a wider pool of potential buyers, including specialized sustainability-focused investors, strategic acquirers looking to enhance their sustainability profile and public market investors with specific sustainability mandates.\r\n\r\n \r\n \r\n\r\nAs UBS\u2019 Ther\u00e9se Lennehag notes in the report, \u201cIf companies can come to their [investment] bankers with the commercial insights, quantified business case and revenue and EBITDA [earnings before interest, taxes, depreciation and amortization] growth plans paired with compelling use of proceeds to make that connection for buy-side investors to get them excited, they can more credibly earn that sustainability market premium.\u201d\r\n \r\n The imperative for action in the net zero transition \r\n\r\n \r\n \r\n\r\nThe climate challenge demands unprecedented mobilization of capital and expertise. Private markets stand uniquely positioned to channel resources toward effective solutions while generating attractive returns.\r\n\r\n \r\n \r\n\r\nFor executives, there has never been a more important time to partner with investors who understand the strategic value of sustainability and can help transform business models accordingly.\r\n\r\n \r\n \r\n\r\nAs Starace notes on that partnership:\r\n\r\n \r\n \r\n\r\n\u201cWe are going to stand by you, we\u2019re going to work with you and we\u2019re going to make it happen. It\u2019s a liberating moment for companies \u2013 an opportunity to dream big and execute on it.\u201d\r\n\r\n \r\n \r\n\r\nFor asset owners, the question is not whether to invest in the energy transition but how to identify managers with the right capabilities to execute this complex transformation. Those who successfully navigate this shift will not only generate superior financial returns but also contribute meaningfully to building a more sustainable economic system.\r\n\r\n \r\n \r\n\r\nThe energy transition represents an environmental necessity and a generational investment opportunity. By combining available capital with operational excellence and commercial innovation, private markets create a powerful engine for change.\r\n\r\n \r\n \r\n\r\nThe winners of tomorrow will be those who act decisively today, embracing the transformative potential of sustainable business models and positioning themselves at the forefront of the net zero economy.\r\n\r\n \r\n \r\n \r\n \r\n "

"The Critical Role of Private Capital in Transforming Industries for a Sustainable Future"

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