For this episode of the Venari Podcast’s Sustainability Series, our Transport & Logistics Lead Gov Kandola spoke to EmergeVest CSO Virginia Alzina on sustainability in investment firms. You can read a transcript of their conversation below.
Gov
Welcome back to the Venari Podcast. I'm Gov Kandola, and we're joined for our eighth and final episode of the Sustainability Series with Virginia Alzina. Now, Virginia is Chief Sustainability Officer at EmergeVest.
Virginia, thanks for joining us.
Virginia
Thanks for having me.
Gov
No, I really appreciate you being on. And today's an interesting one because we are looking at things from a slightly different angle, and that is from the perspective of an investment firm rather than just the company, who are making the adjustments. But I suppose to kick us off, do you mind giving our listeners a bit of an insight into who EmergeVest are?
Virginia
Sure. EmergeVest is a global investment firm that was formed in 2013, with assets under management of $850 million. And we seek to be a great business by generating value for all our stakeholders. We operate cross-border, mid-market growth buyouts in the sector of logistics, global supply chain technology, but also mostly for the logistics sectors and some also in the financial services. And the total transaction value that we have is about $2 billion.
We have offices in Hong Kong, Singapore and London. And we are very operationally focused, which means we have a value creation playbook and system called EVOS. Once we buy the companies and the portfolio companies, we go hands-on to create value and change.
Gov
Definitely. And you've had a very interesting career, spending time at the UN and working in Myanmar. What made you want to focus on this space, and how did you end up at EmergeVest?
Virginia
It's been a long journey. It started over 28 years ago, and I've been across five continents. It all started by chance. I got an internship opportunity at the United Nations Headquarters in New York. And that's where I learned about the UN Environment Programme, which is an agency that deals with environment, sustainability and environmental protection. So, it sparked my curiosity about all the sectors and areas they were working on.
I decided to stay in the US, pursue a master's degree in environmental sciences, and then a PhD in environmental engineering and pollution control. And that's how I ended up staying in the US for nine years working at the multilateral financial institution called Inter-American Development Bank. My role as an environmental protection specialist was to make sure all the loans and infrastructure projects had no serious environmental and social impacts. And then I moved to the Mediterranean region as the Director of the UN centre on sustainable production for the 20, 21 sectors of the Mediterranean countries.
I spent five years there, until I moved to the private sector, to Asia. I spent a few years in Hong Kong and then seven years in Myanmar, working as Group Director of Sustainability of two holding companies listed on the Singapore Stock Exchange, but which had their headquarters in Yangon, Myanmar.
And when COVID happened, unfortunately, there was a coup d'état on 1 February 2021, and I could no longer work in Myanmar and Yangon because of the coup. So that's when I joined EmergeVest, which is, as I said, this private equity fund based in Hong Kong.
Gov
Amazing. That's an incredible career – it's taken you to all parts of the globe.
I suppose, focusing on EmergeVest, I really wanted to deep dive into this question – what is responsible investing? And EmergeVest’s approach to it. Do you mind giving us a bit of an insight to that?
Virginia
Yes, sure. Responsible investment is not a new concept. The UN, already in 2005, decided jointly, with some other institutions and institutional investors, to create some guidelines on what responsible investment was, and created six principles for any fund, asset manager, or institution that wants to do a responsible investment.
So, the principles are very straightforward. It means that to analyse and introduce ESG, environmental, social and governance issues into the investment analysis and decision making. Before you buy a company, try to analyse from the ESG perspective and point of view if it makes sense, what are the opportunities and the risks. Once you buy the company, Principle 2 is to actively be owners of the ESG and introduce them as well into your portfolio company in both policies and the day-to-day practices. Principle 3, to seek disclosure, request your portfolio companies to disclose, with an environmental sustainability report, what are the advancements in ESG issues? And in all the companies where an asset manager invests, they should seek this data and the reporting on ESG issues at management.
Also, we promote the acceptance of the Principles among peers and among the investment industry. That's Principle 4. Principle 5, work together to enhance effectiveness implementing the Principles. So, the UNPRI has a platform where all the signatories of the Principles of Responsible Investment jointly collaborate to endorse, and then has those implementing the principle: our work together.
And the last one, Principle 6, is that we commit ourselves to report on the activities and the progress implementing the Principles. And the way EmergeVest is engaging in responsible investment is, well, as my function of Managing Director, I conduct due diligence and analyse each company before we invest in it. From the point of view of ESG, both if it has potential risks, or which are the potential opportunities that we could, once we get hands-on, improve – to contribute, for example, to any of the Sustainable Development Goals. Once we purchase the company, we invest in portfolio companies. We become active owners. So, we start implementing policies on ESG and practices.
For example, in our portfolio companies in the logistics sector, we implement health and safety policies. DEI, net zero. How are we going to do to reduce greenhouse gas emissions? How are we going to protect data privacy and security? Any topic that is material for a logistics company, in this case. We prepare policies in those material topics, implement initiatives and start measuring our progress.
We also ask our portfolio companies to report annually, and we get external assurance for our greenhouse gas emissions data, as well as for the sustainability reports. We also collaborate with other industries, associations, asset managers. Also, at COP26 in Glasgow, we endorsed, both as EmergeVest and EV Cargo, the Memorandum of Understanding on Zero-Emission Medium- and Heavy-Duty Vehicles, and it was signed between countries, industry associations, companies, investors. It has, as an objective, to get 30% of sales or purchases of mid- and heavy vehicles – it can be buses, trucks or anything – to net-zero or zero-emission by 2030, and 100% by 2040. Those are very ambitious standards.
We also attend COPs, the conference of the parties on climate change, and present on our cases: how we managed to reduce some emissions and support others in this journey. And as well, as EmergeVest, we also report on these Principles for Responsible Investment under the UNPRI. And recently we got an award for that: last November, the Responsible Investment Award for Private Equity of all Asia. We are very proud of these last achievements.
Gov
Well, that’s certainly an award you want to be winning in terms of the industry and the role that you play as well.
I was going to say with net zero, on the topic – what steps have EmergeVest taken to help their portfolio companies transition to a low-carbon economy?
Virginia
We believe, for the logistics sector and transport sector, that these are hard-to-abate and such important contributors to climate change, that our mission is to support portfolio companies in this sector to become net-zero and to transition to a low-carbon economy, because otherwise we wouldn't be in business in the next year. So, what we've done to support them is, it's been a long journey and the last three years we worked very hard. But we've achieved impressive results.
The first step was to account for all the CO2 emissions. And, as you know, there are emissions that are direct, the ones that come directly from fuel consumption. We have a fleet of trucks in the UK and most of our Scope 1 emissions, direct emissions, come from that fleet. But we also have 80 offices around 25 countries. So, we also have Scope 2 emissions, which are these indirect emissions from electricity, purchases, and a big impact on Scope Three emissions, which are all the indirect emissions that come from all these cargo movements that we are paid for by our clients to move, cargo from all over the world.
But we managed to account for 2021. And got this as our baseline. Once we got our baseline, you know that what gets measured gets managed. Once we got our baseline CO2 footprint in 2021, every month, every quarter, we manage how much we reduced emissions. So we introduce board reports and reports to the Sustainability Committee of the business regularly. They are ingrained and they understand that this is a goal for all the company and everybody's in charge as well, and responsible for getting those emissions reductions.
We also got Science Based Targets Initiative approval, which is the agency that certifies that your emissions reductions are fast and meaningful enough to be on top of the Paris Agreement and 1.5 degree-Celsius heating. So that's also another very important milestone that we've achieved.
And then we created the the net-zero targets based on the Science Based Targets Initiative. We know that if we want to reduce our emissions by almost half by 2030, how much we need to reduce per year at Scope 1, Scope 2, and a little less ambitious target is for Scope 3, because it's our indirect emissions. But then, now that we have all these governance frameworks, we also went into more detail. I'm sure you want to know how we reduce Scope 1 emissions because most of our emissions come from the fleet. We had to switch to biodiesel, which has big potential of reducing CO2 emissions. We switched almost 2 million litres of diesel to an HVO, which had a big impact on reducing our Scope 1 emissions.
We also introduced measures and had a programme for fewer miles, friendlier miles. We upgraded the electric, we upgraded diesel trucks, we electrified some of our fleet and a lot of our own forklifts and machinery, but also another thing, we introduced ESG metrics as a bonus for our managers. So they know in their performance review that if they contribute to reducing emissions, they also get a percentage of their bonus is tied to this, to these metrics. So that also incentivises the management into getting these important milestones, part of them.
And I have to say as well, that last year we got an award as well for being the best sustainable, logistics company in the UK. We got recently awarded because not only because of sustainability, but also the mitigation of climate change and reduction of cO2 emissions, but also by conducting a holistic approach to sustainability: taking care of our employees, our health and safety, improving women’s representation and management level of the company and having most of the indicators and material topics covered under the sustainability strategy of the company.
Gov
Your role is different to most as you wear two hats, working as an MD for EmergeVest but then also as the CSO for their biggest portfolio company, EV Cargo. How do the two roles differ, and how do you manage the challenges of doing both?
Virginia
Yes, it's a lot of work because as you said, it's two different hats, two different roles. We report differently to the UN Principles of Responsible Investment as an asset manager and private equity fund. And we have different reporting standards as a company, as EV Cargo, and as a logistics company. Same with the materiality, the topics that keep as responsible investment of a fund or a logistics company are very different.
Also, they are, there are differences in how you reduce emissions of a fund. Because we don't have Scope 1 emissions. We do have Scope 2 and we have Scope 3 emissions. But they are different than the ones that a logistics company has, that has a lot of scope on emissions because we burn fossil fuels.
And so it’s quite different. But at the same time there are a lot of synergies because both EmergeVest and EV Cargo focus on mostly the logistics and supply chain industries. So this is where the synergies are. And I would say that the best way I manage both is by having time management and trying to allocate my time rigorously to what can be done at EmergeVest and EV Cargo, collaborating with peers, especially at EV Cargo that has 3,000 employees.
So I can delegate some of the functions and try to get some other colleagues to help me calculate data or implement policies and take the initiative, especially on health and safety or diversity and data privacy and security. And having a deep understanding on what are the the priorities of each organisation.
Gov
That’s incredible.
It's been fascinating to learn more. And, obviously, this episode was unique, , looking at it from an investment firm’s perspective. So thank you, Virginia, I really appreciate you taking time out of your schedule to speak with us.
Virginia
Thank you, Gov. It was a pleasure.
This interview transcript has been lightly edited for clarity and concision.
Gov is always keen to help firms in the transport and logistics sectors to meet their sustainability goals. Just reach out if you would like to find out more.