Deloitte eyeing independent IPO sponsor status

23 December 2014

In 2013 Deloitte voluntarily lost its independent IPO “sponsor” status. Less than two years later, the Big 4 firm has changed its mind, and is eyeing a return to the recovering IPO market.

The status of independent sponsor allows a third party to act as independent advisor for IPOs, which involves co-ordinated due diligence and the development of prospectus for the offering as well as communication between the London Stock Exchange (LSE), the issuer and the UK listing authority, which is required for premium listings on the LSE. In general, the role of independent sponsor is filled by banks, acting as a deal bookrunner. Independent organisations, such as Rothschild and Lazard also have the ability to act as sponsors.

As it stands, of the Big Four consulting firms, only PwC is empowered to act as independent sponsor. Deloitte, according to the UK Listing Authority, lost its status in September 2013, an authority spokesman saying: "Deloitte voluntarily stood down from acting as sponsor in 2013."

Deloitte - IPO

Yet just over one year down the line, Deloitte has set its sights on regaining its status, part of a wider strategy to develop and restructure its equity and capital markets and PLC advisory team. A first step was recently taken with the hiring of former JP Morgan executive director Chris Nicholls to run the independent advisory team. To further boost the team, Deloitte is now looking to attract high ranking bankers to the role of assistant director, ideally someone with expert knowledge and experience that will afford the authorities trust, allowing the firm to return to the IPO playground.

In a still open job description for the new role of assistant director for the PLC advisory team, Deloitte states that it is looking to become a "market-leading independent adviser". Further on the firm writes: "Central to this is for Deloitte to regain its status as sponsor. The team expects to see increased opportunities in this area and has made being approved as a sponsor a key priority."

Speaking about the developments and opportunities in the IPO market that the sponsorship status would leverage, John Hammond, head of equity capital markets at Deloitte, says: “We are confident that the IPO market will recover from recent turbulence and that clients will continue to see the importance of receiving truly independent advice when they are listing or raising secondary funds.”


Private equity firms ramp up sustainability focus

19 April 2019

In line with business leaders across the industrial gamut, private equity firms are increasingly on board with sustainability projects. According to a new study, the investment arms for major funds are implementing a number of strategies aimed at supporting sustainable economic development in line with global goals.

While the business world has finally begun to acknowledge the danger of climate change, effective action plans remain difficult to achieve. The Paris Agreement has stipulated a clear target for the decades leading up to 2100, although massively reducing emissions while not crashing the economy could be a tall order.

Businesses that are able to acquire capital can use it to boost productivity and output, thereby creating a virtuous cycle of development. However, some businesses are better able to utilise resources than others, both in terms of their relative productivity, as well as the value of the respective outcomes relative to costs (including environmental harms). Financing can therefore provide an avenue to select businesses that are aligned with various global sustainability goals, while shunning those that drive little or unsustainable social value creation.

Top moves made by investment arms towards responsible investment

Profit has for the longest time been the central criterion for investment decisions. Yet profit at any cost is increasingly seen as creating considerable social harms, while often delivering only marginal value. As a result, the private equity sector, which was initially sluggish to change its ways with regards to sustainability, has started to see the topic as an opportunity as much as a challenge.

A new study from PwC has explored how far sustainability goals have become part of the wider investment strategy for private equity (PE) firms. The report is based on analysis of a survey of 162 firms and includes responses from 145 general partners and 38 limited partners.

Maturing sustainability

Top-line results show that responsible investment has become an issue for 91% of respondents. For 81% of respondents, ESG (environmental, social, and corporate governance) was a board matter at least once a year, while 60% said that they already have implemented measures to address human rights issues. Two-thirds have identified and prioritised Sustainable Development goals that are relevant to their investment segments.

Change in concern and action on climate-related topics over time

While there is increasing concern around key issues, from human rights protections to environmental and biodiversity protection, the study finds there are mismatches between concern and action. For instance, concern among investment vehicles around climate change has increased since 2016.

In terms of risks to the PE firm itself, concern has increased from 46% of respondents in 2016 to 58% in the latest survey. However, the number who have taken action remains far below those concerned, at 9% in 2016 and 20% in 2019. Given the relatively broader scope of investment opportunities, portfolio companies face higher risks – and more concern – from PE professionals, at 83% in the latest survey. However, action is less than half of those concerned, at 31%.

Changing climate

In terms of the climate footprint of the portfolio companies, 77% of respondents state concern in the latest survey. 28% of respondents are taking action through the implementation of measures to mitigate their concerns.

Concern and action taken on ESG issues

In terms of the more pressing issues for emerging responsible investment or ESG issues, governance concern of portfolio companies comes in at number one (92% of respondents), while 60% have taken action on it. Firms have focused on improving awareness – setting up policies and a range of training modules for their professionals around responsible investment decision making. Cybersecurity takes the number two spot, with 89% concerned and 41% implementing strategies to mitigate risks.

Climate risks take the number three spot in terms of concern for portfolio companies (83%), but falls behind in terms of action (31%). Health and safety track records are a key concern at 80% of businesses, with 49% implementing action. Gender imbalance within PE firms themselves ranks at 78%, which is being dealt with by 31%. A recent survey from Oliver Wyman showed that there is gender balance at 13% of GP teams in developed countries.

Biodiversity is also an increasingly pertinent topic, with risks from pollution and chemical use increasingly driving wider systematic risks around environmental outcomes. It featured at number eight on the ranking of most likely global risks for the coming decade, with its impact at number six. As it stands, biodiversity is noted as an issue at 57% of firms, with 15% implementing action.