Quadria Capital: Investing for lasting change

PRI Awards 2024

Organisation: Quadria Capital Investment Management Pte. Ltd. 

Signatory type: Investment manager 

HQ country: Singapore 

The approach, initiative, or process 

Quadria Capital, one of Asia’s largest healthcare-focused private equity firms, manages over US$3.5 billion in assets, investing in the rapidly growing economies of South Asia and Southeast Asia. 

We believe that access to healthcare is a fundamental human right. That everyone should have access to high quality, affordable healthcare. We are proud of the progress made, both in terms of the returns we have delivered to investors, and the impact that has been created through our investments in the healthcare sector. Over a decade of investment activity, we have upheld the principle that responsible and sustainable investing drives impactful returns across our core impact pillars. In 2023, we enhanced our approach by introducing an Impact Management and Measurement (IMM) framework, implementing a three-tiered strategy to ESG and impact. 

Our IMM framework, guided by the Operating Principles of Impact Management (OPIM) and aligned with SDG target indicators, integrates ESG and impact factors into our investments. Quadria focuses on healthcare-driven businesses, providing capital, expertise and networks to generate measurable impact in areas like accessibility, affordability, quality and awareness. Our strategy, aligned with the UN SDGs, emphasises stakeholder benefits and transformative healthcare solutions, with investment decisions guided by a robust impact thesis and scorecard. 

Throughout the investment lifecycle, our IMM framework defines intended impacts through key performance indicators (KPIs) and metrics, demonstrating measurable performance outcomes and impacts. These differentiated impact metrics, aligned with international and industry ESG and impact standards, ensure standardisation and effectiveness in monitoring and reporting impact performance regularly. 

We integrate ESG analysis through detailed ESG materiality studies and third-party due diligence to identify risks and opportunities, aligning with stakeholder expectations and international ESG frameworks such as the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), International Finance Corporation (IFC), and S&P Dow Jones Sustainability Index (DJSI). Our portfolio partners are expected to execute agreed ESG and/or impact action items within a stipulated timeframe. Performance outcomes and impact are continuously monitored and tracked throughout the investment period, focusing on measuring outcomes and impacts aligned with our impact thesis and investment strategy at ownership and exit stages. 

In 2023, our IMM framework received third-party validation, achieving high ratings on six out of eight OPIM Impact Principles. This reflects our dedication to operational excellence, rigorous documentation, and consistent impact-focused decision-making. 

Impact scoring and monitoring 

Quadria upholds a rigorous standard for achieving core impacts, ensuring measurement, monitoring and reporting throughout the investment lifecycle. At the due diligence stage, an ex-ante analysis evaluates both actual and anticipated impact at exit using an impact scorecard, based on four core impact pillars. The scorecard construct has identified a set of KPIs across the four pillars (Accessibility, Affordability, Quality and Awareness) which are scored on a scale of 1 (low) - 5 (high). By virtue of the scorecard, an objective assessment of each portfolio company is done to score across impact pillars as well as to derive an overall impact score at the time of investment and an anticipated impact score at exit. The impact scorecard is complemented by a qualitative evaluation of potential companies. This assessment includes a clear articulation of the impact thesis, outlining the key healthcare challenge and the impact opportunity presented by the investment. It also considers alignment with the SDGs, impact risk and contribution, and how the opportunity is rooted in at least one of Quadria’s core impact pillars. 

ESG integration 

Our focus at the fund is to bring ESG considerations into the investment decisions of target companies, specifying ESG-related opportunities as they define their deal theses. Value creation is the top driver for ESG activity. Quadria creates more value by defining, for each target company, a superior ESG profile in terms of impact on the environment and society as well as alignment with sustainability-related market shifts and regulation. Quadria then determines what changes are needed for a target to achieve such a profile, and works on those changes over the holding period so that the company is well prepared for an ESG-enhanced exit. 

We focus on some key ESG themes, such as operating model mobilisation, supply chain challenges, emissions inventory and target setting, and formalising governance structures, to ensure that each company collects, monitors and reports on its ESG data. Some areas where we have worked with companies include: 

• Ensuring regulatory compliance: Stringent environmental regulations are becoming the norm across geographies. We are making sure our companies understand their emissions and the need for decarbonisation and emission reduction targets to navigate these evolving regulatory landscapes. 
• Operational efficiency: Implementing energy-efficient practices, which can translate into significant cost savings, bolstering the bottom line. 
• Reputational advantage: Companies with strong ESG credentials enjoy enhanced brand reputation and customer loyalty, leading to a competitive edge. 

As the role of ESG continues to evolve, it becomes increasingly clear that sustainable practices are key to achieving long-term financial success. Quadria Capital embraces and integrates ESG and impact principles and ensures sustainability and resilience are at the forefront of investment decision-making. 

The measures to ensure transparency and generate outcomes 

In the face of our planet’s escalating challenges, the urgency to embrace ESG stewardship has never been more crucial. 

Quadria proactively supervises and monitors the ESG and impact performance of each of its portfolio companies. In addition to quarterly and annual reporting requirements from each investee company, Quadria also monitors the progress of an ESG Action Plan for each of its investee companies. One of the primary areas is the development of an ESG framework at all our investee companies to ensure a structured approach to managing environmental and social matters on an ongoing basis; and monitoring mechanisms to supervise the ESG performance. 

Quadria believes that responsible and impact-oriented investment is critical to long term, sustainable value creation and it is proud to invest in businesses that are proactively working to address the pressing challenges around healthcare provisioning in the target region. Quadria Capital seeks to execute its strategy by investing in companies that have the intention to create a positive social impact through their products and services. We ask four key questions when considering an investment: 

• Will this investment make healthcare more accessible? 
• Will it make it more affordable? 
• Will it increase the quality of healthcare? 
• Will it raise awareness of healthcare solutions? 

An ESG and Impact report is prepared annually covering all portfolio companies providing updates on: 

• Material ESG issues identified, and key stakeholders engaged with.
• Quadria’s corporate governance philosophy and practices, human capital management and environmental impact.
• Portfolio ESG performance: 
  • Corporate governance: Board composition, gender representation in senior management, and policies and practices related to anti-corruption, code of conduct, and whistleblower protection. 
  • Environment, Health and Safety (EHS) aspects: Health and safety programmes and trainings, emergency preparedness and response plans, business continuity planning, emissions monitoring, water consumption and recycling, waste management practices. 
  • Social: Maintaining gender diversity among employees, tracking new hires, providing training, enforcing non-discrimination policies, prohibiting child and forced labour, and documenting any significant ESG incidents. 

Ensuring that our companies disclose annual ESG data enables us to identify potential risks early and take proactive corrective actions. Key best practices include:

• Setting clear ESG goals, targets and measurable objectives in alignment with stakeholder expectations. 
• Implementing strong data collection systems and tools to capture accurate information on ESG initiatives. 

 

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.