Shortlisted for PRI Awards 2024: Innovation in Responsible Investment Strategy.
Organisation: GENUI
Signatory type: Investment manager
HQ country: Germany
The approach, initiative, or process
GENUI is one of very few core strategy European mid-market buyout investors in private markets delivering strong financial risk-adjusted returns and measurable positive impact. As a genuinely entrepreneurial investor GENUI believes that companies with sustainable and attractive value creation potential have a strong culture of doing the right things right, what GENUI calls good entrepreneurship. It is what we try to live by and promote at GENUI. When we founded GENUI in 2014, we knew we wanted to have an impact; something that goes beyond a merely financial view of success. Over the course of establishing our second-generation fund (GENUI II), we set ourselves the goal of encouraging our portfolio companies to contribute to accelerating the transition to a more sustainable economy and society.
Being a certified B Corp, GENUI’s strategic sustainability objective is to support positive and measurable social or environmental effects and pursue alignment of its investments with the United Nations Sustainable Development Goals (SDGs). GENUI believes that strong financial returns can be enhanced by selecting and supporting companies that create a positive impact for society and the environment. GENUI therefore focuses on companies that contribute to advancing what GENUI regards as three of our society’s central tasks: good health, digitalisation and environmental transformation.
A framework for sustainable investing
The GENUI Sustainable Investing Framework ensures that sustainability is not only embedded in GENUI’s own operations but is also integrated throughout the investment process:
- GENUI ensures independent measurement, reporting and disclosure.
- Its sustainability governance structure ensures senior-level commitment from GENUI as well as advice in the Entrepreneurs Boards of its portfolio companies. This enables GENUI to continuously track progress and identify and advise on ESG-related initiatives.
- GENUI incorporates impact and ESG due diligence findings in all relevant investment process documentation in the same manner as for other key due diligence, and in discussion in the investment committee as part of its responsibility for GENUI’s investment strategy.
- It prioritises the impact assessment of the business model with respect to climate-related and social matters in areas such as strategic asset allocation, investment strategy and risk management with a view to realising GENUI’s objective to achieve strong market financial returns by genuinely promoting social and ecological impact objectives.
GENUI encourages initiatives for achieving tangible positive impact and ESG outcomes at its portfolio companies. GENUI offers advice, a network and a communication platform to management teams on their journey to make a difference. GENUI offers the portfolio companies advice on how to measure, reduce and compensate their carbon footprint, thereby supporting the acceleration of the transition to a more environmentally sustainable economy. GENUI also conducts an annual third-party assessment of the climate change impact in alignment with the TCFD, covering transitional and physical risk scenario analyses.
Measuring impact
GENUI also designed a set of key performance indicators (KPIs) and priorities allowing GENUI to measure progress on core social and governance aspects. Data is collected via dedicated third-party ESG software, streamlining the collection, monitoring and reporting of data and ensuring data quality. While GENUI promotes diversity, employee satisfaction and other key social aspects, equal pay is GENUI’s central social goal; achieving equal pay in portfolio companies is targeted during GENUI’s ownership and is a very meaningful way to address social inequality.
In addition, GENUI has established the GENUI Portfolio ESG Roundtable, comprising the sustainability representatives of the portfolio firms, that comes together on a semi-annual basis to discuss ESG initiatives and share best practice on measurements and reporting.
Starting in 2024, when assessing new investments, a specialist consulting firm scores the positive impact of the investments’ business model against the Impact Frontiers framework / Impact Management Project’s (IMP) five dimensions of impact. This is reviewed on an annual basis. Furthermore, for each investment, a definition of core company-specific impact KPIs is determined to align with selected SDGs and GENUI’s theory of change. Post investment, an ongoing analysis is conducted by an independent consultancy to estimate the Net Value to Society (NVS) created during GENUI ownership, where appropriate.
GENUI has engaged an external assurance and verification company to provide independent assurance of the quantitative impact measurement as part of the verification of GENUI’s alignment with the Operating Principles for Impact Management (OPIM).
The measures to ensure transparency and generate outcomes
GENUI seeks to apply a comparable level of scrutiny and rigour to the measurement and reporting of impact and ESG as it does for financial performance. GENUI publishes its sustainability reports on an annual basis including information on impact measurement, ESG initiatives and KPIs at management company level and portfolio company level. Further, GENUI has established the GENUI LP Sustainability Council, an advisory body comprising selected GENUI investors’ sustainability representatives, that comes together on a semi-annual basis to discuss potential improvement measures and industry best practice.
GENUI is committed to being transparent about its sustainability practices including its achievements, goals and the initiatives and principles supported.
And, GENUI publicly discloses the following documents on its website:
- Sustainable Investing Framework
- Sustainability policy
- Annual sustainability reports
- OPIM disclosure statement and verification statement
- Strategic TCFD approach
- Sustainability-related disclosures according to the SFDR
Since 2022, GENUI has contributed to the Invest Europe Impact Investing Working Group and the Invest Europe ESG Working Group. Being part of these working groups enables knowledge transfer and alignment on impact investing frameworks and methodologies and also promotes responsible investment practices and the consideration of ESG issues throughout the broader private equity community.
GENUI acknowledges that the climate crisis is one of the biggest challenges of our time and commit to achieving net zero by 2050. GENUI set scope 1 and 2 targets as well as scope 3 portfolio targets with the Science Based Targets initiative (SBTi). These were approved in 2023 and are publicly available on the SBTi website.
In 2023, GENUI became signatory of the Institutional Limited Partners Association’s (ILPA) initiative Diversity in Action and joined Charta der Vielfalt, the leading German Diversity Charter & Association, emphasising the commitment to diversity. Furthermore, GENUI initiated the Entrepreneurs’ Social Impact Partnership (Unternehmer Stiftung für Chancengerechtigkeit [USC] gGmbH), which is financially backed by GENUI Entrepreneurs and is structured to invest in social impact funds, including those at GENUI and other leading investment firms. At the USC, GENUI brought together an experienced management team, exceptional entrepreneurs and an innovative investment model. The entire proceeds are used to improve the opportunities of children and young people in the areas of education, health and societal inclusion, contributing to the SDGs.
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.
GENUI disclaimer: The case study contains only a concise description of the activities of GENUI and is in all respects subject to revision and amendment. The case study is not a prospectus, nor an offer of interests or other securities nor an invitation to subscribe for interests or other securities. The case study is compiled by GENUI GmbH with the greatest possible diligence. GENUI GmbH does however not warrant or guarantee the accuracy, completeness or fairness of this case study and the information contained herein and no reliance may be placed on any information set forth herein for any purpose whatsoever.
