Bintang Capital Partners: Pursuing impact by building B Corps

PRI Awards 2024

Organisation: Bintang Capital Partners  

Signatory type: Investment manager 

HQ country: Malaysia 

The approach, initiative or process 

Bintang Capital Partners is an award-winning private equity firm investing in impactful and innovative growth-stage companies (private markets). The firm focuses on ASEAN nations, which are disproportionately affected by climate change and social challenges, whilst awareness of impact investing remains low in the region. This limited awareness is compounded by the lack of standardised impact data measurement, and reliable data is crucial for attracting global capital whilst ensuring impact authenticity. 

As part of the firm’s impact measurement tool, Bintang chose to invest in B Corps due to the following reasons: 

• Independent verification: B Corps must be certified (and subsequently recertified every three years) by B Lab.  

• Continuity of impact: The recertification requirement ensures that companies continue to meet high ESG performance standards even post Bintang’s exit. 

• Versatility: B Corps are found in all sectors regardless of geography, company size and business model. 

• Balanced: The B Corp framework is designed in a way that is easy to adopt because it strikes the right balance between ease of certification and encouraging impact-oriented behavioural shifts in ASEAN growth-stage companies. 

Evolution of Bintang’s impact strategy 

Commencing with Bintang’s maiden fund, BCP Asia Fund I, all Bintang investees are legally required to work towards obtaining B Corp certification within two years of investment. 

Nevertheless, there were no hard-coded repercussions in place for investees who fail to achieve certification. Consequently, Bintang relied on moral persuasion to motivate portfolio companies to comply with this mandate. 

In March 2024, Bintang launched its sequel impact funds, BCP Asia Fund II (a sector-agnostic B Corp propagator fund) and BSIF I (a semiconductor-ecosystem-focused B Corp propagator fund) – collectively referred to as Sequel Funds. Both aim to encourage adoption of the B Corp model and to collect a comprehensive dataset covering a range of ESG-related impacts.  

With these new funds, Bintang is putting in place legal mechanisms which embed a reward-and-penalty system in the transaction process, at both pre- and post-deal stages. The firm created this structure, which is believed to be a pioneering approach in ASEAN, to better align B Corps with the creation of positive and measurable impact. 

Bintang’s investment strategy is guided by its proprietary Responsible and Sustainable Investment Policy, which builds upon three key frameworks applied across three levels:  

Level I: The UN Principles for Responsible Investment - the foundational and philosophical baseline of Bintang’s ESG strategies. 
Level II: Operating Principles of Impact Management - an impact implementation framework encompassing the entirety of Bintang’s investment lifecycle. 

Level III: B Corp certification - impact measurement tool applied to Bintang’s fund and investee companies. 

Bintang’s Sequel Funds’ strategies are employed in stages as follows:  

Pre-investment phase 

Transactions are first screened against exclusion lists to avoid investments in businesses which pose significant ESG risks. Bintang conducts thorough internal and external sustainability due diligence (SDD), including preliminary impact assessment scoring to evaluate potential investees’ ESG practices. Through the SDD exercise, the firm also assesses the feasibility of achieving B Corp certification within 24 months. SDD findings are summarised within investment memoranda, and an ESG action plan is developed which incorporates a 100-day plan for addressing critical ESG risks and a value-creation plan (VCP) for long-term impact opportunities. 

Post-investment phase 

Bintang collaborates closely with investees to manage and deliver impact objectives by appointing board representatives with a focus on ESG/impact as well as seconding staff members to support the implementation of the 100-day plan and VCP. Regular internal and external meetings are held to track progress in executing the 100-day plan and VCP. 

Should investees fail to achieve B Corp certification, the additional capital returned to Bintang via an equity clawback mechanism (as a form of capital compensation) can be redirected by limited-partner-investor recipients to other impact investments. 

Conversely, in the event an investee achieves B Corp certification earlier than expected, further capital commitments by Bintang can be made, based on a higher company valuation. Bintang may also choose to reimburse all B Corp-related fees incurred by the investee during the firm’s investment holding period. 

This approach introduces an impact-guarantee mechanism to protect investors against impact-related downsides while ensuring that Bintang meets its investors’ expectations on impact delivery (referred to as an impact return on capital deployed, or simply return on impact), which are embedded alongside traditional investment protections targeted at preserving investment returns (return on investment). 

Exits 

When exiting investments, Bintang performs proprietary SDD (and may also request third party SDD) to ensure that identified ESG issues have been addressed and impact outcomes are verified. Post-exit, the firm documents companies’ impact performance to compare expected and actual outcomes and use these findings to gain insights (especially in areas where targets were not met) and inform future investment decisions / management processes. 

The Sequel Funds also incorporate a unique carrot-and-stick mechanism to align Bintang’s incentives with the achievement of impact outcomes. This involves carry-at-risk, where 25% of Bintang’s carried interest (i.e. performance fees) is tied to impact performance and not just financial returns, as is usually the case with traditional private equity fund structures. 

The Sequel Funds will employ the following practices across all investees: 

• Environmental: Bintang secures a third-party pre-investment carbon footprint and intensity audit to identify potential risks and opportunities. This audit forms the basis for a carbon transition strategy implemented with each investee, tracked through a second third-party audit conducted on the third deal anniversary. 

• Social: Bintang uses annual eNPS surveys to assess the correlation between improved gender diversity and employee morale, creating datasets which can be used to correlate employee diversity initiatives with financial metrics, such as revenue and profit per employee. Bintang then reports these metrics annually to measure progress and determine correlation. 

• Governance: Bintang leverages B-Corp’s framework to establish a sustainability and impact baseline for its investee companies. Bintang calculates a composite portfolio B Impact Assessment score to gauge its portfolio-wide impact. This score combines individual investee scores, weighted by company size (revenue and staff strength). 

The measures to ensure transparency 

Clear and accessible information: 

• Bintang provides regular updates on its processes, practices and outcomes through quarterly reports to investors, including impact and ESG progress for each portfolio company. 

• The firm’s investees are required to consistently report on financial, operational and impact metrics on a monthly/quarterly basis, which are tracked and monitored by Bintang. 

• Bintang plans to publish details of its investees’ B Corp status on its website, including the progress of their B Corp application process, accreditation date and scores for full transparency and disclosure. 

Accountability and oversight:  

• Bintang appoints a representative as a board member at investees and seconds its analysts to these companies to provide on-the-ground insights and oversight. 

• This approach ensures constant updates and a deep understanding of each investee’s progress, facilitating effective monitoring and execution of impact objectives. 

Example of reporting and sustainability outcome 

Care Concierge (CC), a provider of homecare and elderly care solutions in Malaysia, illustrates how Bintang’s investment strategy translates into improved outcomes. Since Bintang’s investment in September 2022, CC has pursued best practices in all three ESG areas: 

• Environmental: CC is monitoring and improving energy efficiency across its facilities. This includes plans to track and compare energy consumption before and after the implementation of energy-saving solutions, such as energy efficient air conditioning units and rooftop solar panels (potentially reducing annual CO2 emissions by 100 metric tonnes). CC has put in place recycling practices and is reviewing its waste management practices across operations. 

• Social: CC has served over 860 elderly customers, providing 1.6 million hours of care as of FY2023. CC has also started offering affordable care packages in 2023 (priced 30% lower than CC’s pre-existing packages) and community outreach programs, including free health check-ups and wellness workshops. CC has created jobs for over 225 caregivers, paying 55% above market rates and providing training for nearly 200 individuals through its Academy Care programme. Two-thirds of CC’s employees are female. 

• Governance: CC has a comprehensive approach to tracking and sharing financial, operational and ESG metrics. These metrics are presented to Bintang quarterly. Bintang’s representative on CC’s board and seconded employees assist with operations and impact objectives. As of June 2024, CC has submitted its impact assessment; is undergoing the verification process with B Lab; and is expected to be the first certified elder care provider in Malaysia’s history. Bintang helped to formalise CC’s governance processes, including adoption of board meeting minutes, a board charter, limits of authority and human resources policies. 

 

PRI disclaimer:This case study aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. It is written by a guest contributor. Authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories. 

Bintang disclaimer:This case study has been prepared by Bintang specific for its use and for informational purposes only. This case study is not intended to serve as a source of primary data, and Bintang makes no expressed or implied warranty as to the accuracy, validity and completeness of any information, opinions or statements contained in this case study. This case study may not be used for and does not constitute an offer to sell, or a solicitation of any offer, or an invitation, or a general solicitation to subscribe for or purchase, or to make any commitments for or in respect of Bintang’s Sequel Funds or any securities or other interests or to engage in any other transaction.