Supporting a more sustainable future
Ancala recently published its 2022 ESG Report. Here, our Managing Partner, Spence Clunie, shares his thoughts on 2022, our progress this year and Ancala’s future plans to support a more sustainable future.
2022 was an important year in which we demonstrated the resilience of our approach in changing market conditions. In the face of unprecedented uncertainty, we remained agile and flexible to work closely with our portfolio companies and create value for all stakeholders.
After a short-lived recovery from the pandemic, economic pressures have been increasing across the globe. The Ukraine situation has disrupted energy security in Europe causing energy prices to surge. Global supply chains are under threat, particularly as the regulatory environment continues to shift and tighten. Companies and households are facing up to the sharp pinch of the cost-of-living crisis.
Alongside the economic challenges, the state of our natural environment continues to change. In Europe, we’ve seen record-level temperatures; flash flooding and water stress across the continent. In response, Europe has committed to nuclear and gas as transition activities. It is also accelerating investment into renewable energy and heat sources, along with expanding the carbon market.
2022 at Ancala
At Ancala, we have continued to deploy our hands-on active asset management approach to help mitigate these challenges. We draw on the expertise of our team members, including our industry partners, to help our portfolio companies continue to adapt to the changing backdrop. I’m pleased to report that the performance of our portfolio reflects the high quality of the companies and the people behind them.
They continue to deliver strong returns and generate above-target cash yield to our investors. We’re especially grateful for the continued commitment and drive of the management teams leading these portfolio firms, who we work with on a day-to-day basis.
As a responsible employer, we have been working tirelessly to provide secure employment and continued growth. On average, since we first invested, we have helped our portfolio companies to grow revenues by more than 40%1 and increase headcount by more than 60%1. We have also helped them to grow organically and through acquisition by providing over €625m2 in additional equity funding since we first invested.
Climate-related risks and opportunities are key considerations in our investment approach and act as an important part of our ESG reporting, engagement, strategy and risk management activities. In our 2022 ESG report, we will be making our first TCFD aligned disclosures, sharing the work that we and our portfolio companies have been delivering to explore and address, where relevant, climate-related risks and opportunities. It is our goal to continue to incentivise and develop initiatives that will support climate change mitigation and adaptation, which will also add value to our investments.
In 2022, we launched our third co-mingled fund and agreed terms on its first investment in Babcock International’s aerial emergency service businesses in Iberia, Italy and the Nordics, now named Avincis. We have since invested in two more companies that will be supporting the energy transition. Noventa, a wastewater energy transfer business, which provides renewable heating and cooling solutions to buildings, facilitating their decarbonisation; and Fjord Base, a supply base that is expanding its services to on and offshore renewable technologies operators.
Enhancing our approach to ESG
As part of our commitment to support a more sustainable future, we have expanded our ESG team by hiring a new ESG analyst. We have also adopted new software tools to further enhance our climate reporting going forwards.
In July 2023, we completed fundraising for our second Sustainable Finance Disclosure Regulations (SFDR) Article 8 fund: Ancala’s Essential Growth Fund. This is supporting the expansion plans of our existing portfolio businesses – Portsmouth Water, Biogen and Leep Utilities specifically. It’s exciting to witness how these companies are resolving some of the UK’s most pressing challenges, including accelerating the energy transition and ensuring the UK has a clean, secure and resilient water supply. In particular, the fund will provide Portsmouth Water with £120m to help finance the construction of the UK’s first major new reservoir since the 1980s, the Havant Thicket Reservoir.
In the coming year, we will further build our understanding of climate related risks and opportunities within our portfolio companies level. We are focused on implementing the Article 8 commitments within the portfolio companies we are investing in.
The energy transition and climate adaptation offer significant investment opportunities which Ancala is committed to pursuing with new and existing portfolio companies. We are proud to be helping critical infrastructure assets improve the communities and environments in which they operate.
Spence’s foreword introduces Ancala’s 2022 ESG Report. You can read the full report, here.
1 – Ancala data as of end of 2022. 2 – Ancala data as of August 2023.