Building Better Businesses: How Apollo Equity Helps Drive Value Through Portfolio Company Decarbonization

The whitepaper builds on Apollo’s longstanding commitment to transparency and expertise in equity strategies by providing an in-depth look into how the Apollo Responsible and Sustainable Operations team helps drive value through portfolio company decarbonization.

Lena Bryant | Managing Director, Responsible & Sustainable Operations, Equity
Carletta Ooton | Operating Partner, Responsible & Sustainable Operations, Equity
Ben Saunders | Principal, Responsible & Sustainable Operations, Equity

Apollo has strategically focused its engagement with portfolio companies on financially material environmental, social, corporate governance (ESG) and regulatory compliance matters, while striving to maintain transparency around these efforts, since 2009. In the 15 years since, the landscape has evolved, with change accelerating rapidly today. The commercial imperative to focus on material climate risks and opportunities, and more specifically, decarbonization, is increasingly apparent to many companies. Businesses have bolstered efforts to ensure compliance amidst evolving sustainability laws and regulation. Companies large and small have set aggressive goals for reducing their greenhouse gas (GHG) emissions and carbon footprints, in some cases including Scope 3 GHG emissions, with the expectation that suppliers and vendors will contribute to these efforts. At the same time, commercial and regulatory pressure to decarbonize can be significant depending upon where a company sits in today’s dynamic environment.

Apollo has actively monitored these trends and is helping to shift the conversation within our funds’ portfolio ecosystem from compliance to value creation. Starting in early 2022, Apollo’s Portfolio Performance Solutions team (APPS) made a step change to strategically drive value creation as part of our differentiated operational efforts. We assembled a team of subject matter experts with operational experience, deployed a new strategic framework, and communicated several external-facing improvement goals. One of these goals is specifically focused on driving decarbonization in private equity portfolio companies in our latest flagship fund, recognizing the opportunity to start decarbonization efforts at the beginning of the deal life cycle. Today, APPS engages with portfolio company management teams to help them develop and execute decarbonization strategies that prioritize return on investment (ROI), helping enable companies to drive long term sustainable impact and value creation for investors, stakeholders, and customers alike. At Apollo, we recognize that driving improvement in these areas is not solely tied to compliance or ‘doing good’ for the environment, employees, or communities; but importantly, it can drive significant financial value that creates a win-win scenario for investors and other stakeholders.

KEY TAKEAWAYS

• Increasingly, companies are facing pressure to decarbonize from stakeholders across the value chain, including customers, investors, regulators, and employees.
• Regulators and private litigants are increasingly focused on so-called “greenwashing,” where a company is alleged to have made a sustainability‑related claim that is false or misleading.
• Many companies lack the capabilities and resources to develop and execute effective decarbonization strategies and emissions tracking.
• We believe the private equity (PE) industry is in a unique position to drive long-term impact across industries, and Apollo is striving to lead the way and share best practices.
• Operational decarbonization can create bottom line value for businesses, both in terms of financial savings and commercial opportunities.
• We have identified accountability mechanisms and created capabilities that we believe can continue to support portfolio companies’ sustainability journeys during Apollo funds’ ownership and beyond.
• Apollo’s demonstrated ability to help portfolio companies set and deliver against decarbonization goals is a testament to the strong operational talent and subject matter expertise across the Apollo’s Portfolio Performance Solutions (APPS) team.