Considering ESG can help portfolio companies mitigate against a range of risks, including talent shortages and poor governance, according to David Breach, the president and chief operating officer of enterprise software investment manager Vista Equity Partners.
In the software space, the two factors that contribute most to the sector’s carbon footprint are power consumption and travel. Implementing strategies that reduce costs associated with these factors can be easily articulated to investors who are focused on returns, Breach said, speaking at the Investment Magazine Fiduciary Investors Symposium held at Healesville last month where he spoke about the technology sector and the evolving role of general partners in enhancing ESG progress and driving accountability.
Vista focuses on business-to-business enterprise software, with a portfolio of over 80 companies and US$94 billion ($138 billion) in assets under management.
Breach said with the uncertainty of 2022, many companies are considering issues such as diversity, equity and inclusion as business imperatives.
“If we’re engaging in activities that broaden the number of people that can apply for jobs at our companies or can apply for jobs at Vista, that’s a business imperative for us. So, as we think about the ‘S’ side of ESG, what we do and how do we deploy our resources, most of that is to support our talent pipeline,” he said.
Practical solutions
On ESG governance Breach advocated for putting the right frameworks and systems in place to hold stakeholders accountable. To ensure Vista is driving towards change, the firm ties financial incentives to executives’ achievements of goals.
“At the firm level, we really wanted to convey to our senior leadership the importance of these initiatives. We created a new long-term ownership plan for our senior leadership which incorporates diversity, equity and inclusion and ESG directly into the vesting of their interests,” Breach said.
He closed the conversation with advice for smaller institutions starting their ESG journeys. He explained that Vista had reached gender parity by analysing its talent pipeline and focusing on broadening its internship program.
“These programs take resources and effort. To do a good internship program, that is a funnel for your analysts and associates, takes a lot of organisational commitment. So I would just encourage people to be practical and to take practical solutions to the problems we’re facing,” he said.
