For me, sustainability is like putting on a new pair of glasses. You suddenly see the world a little clearer. You see the details. You get a richness to the colors that until then were just a blur.

When you’re wearing your sustainability glasses, you don’t only see financial risk. You also see human rights risk, you see labor risk, you see climate risk. Or you turn to the data and suddenly you see not only financial data, but you see other data that’s also relevant. Or you turn to value creation and you see other elements there too.

When I first came to EQT, in 2021, the first thing I realised was that I was wearing a pair of these glasses – and most of my colleagues had pairs of their own – but the industry we are working in doesn’t always look at the world through sustainability lenses. It sees a cost and a profit, but it struggles with calculating the very tangible financial gains that come from investing in a sustainable future.

Gaining wider acceptance of sustainability

With these challenges in mind, there are three key places where I hope to see greater acceptance of sustainability metrics across our industry.

The first comes from our partners in banking. Banks value companies in a way that needs to be refreshed – that requires a new set of lenses. When we create value with science-based targets and sustainability at the core of the value we add to companies, they need to see that as a tangible improvement and not just look at the financials. We will start gathering the banks to help us articulate this as a part of the exit story.

We want to prove that there is a premium valuation at exits. That is our formula for future-proofing companies with sustainability, because they’re worth more and because they’re more resilient.

Secondly, there are places where private equity investors can help operationally.

At EQT, I intend for us to come to a point where, every time we buy a company, we have a set of areas to improve its operational sustainability. That could be ensuring that it has someone on the board who’s working with sustainability. That could be defining metrics to drive sustainability performance. That could be setting net zero targets for CO2 emissions.

We have a set of nine KPIs that we will run through many of the investments we do. These are the nine things we, as an owner, would push for, because we think they create value.

The final part of the formula is to prove that we can grow our companies’ revenue streams sustainably.

Already, when we look at a company and do due diligence, we ask if any of its products or services could be greener. Are there more sustainable product lines in the same company? What would it take for us to double down on them? Can we link this to the incentives of the board? Can we buy other companies who can accelerate this product?

If a company is buying and selling shampoo, for example, how do we increase the share of “good” revenue streams from greener shampoos or sustainable shampoos?

We’re building our own green methodology at EQT to define which products and services are sustainable. Our belief is that when we work on both the operational side and the revenue side, our companies are worth more at exit.

How EQT is embedding sustainability?

Most of the time, embedding sustainability into a business just requires a little forethought.

Think about a house. In the old days, you would build the house and then you would go to the kitchen and say, ‘oh, there is no space for waste management’. And nowadays you can’t build a house without planning to have drawers full of waste bins. You can’t buy anything in Ikea without having the four, five, or even 10 boxes you need to sort your garbage.

Since joining EQT, the biggest shift in my way of thinking is realising that these problems aren’t just something someone else needs to tackle. We’ve reached a point where EQT as a firm and us as individuals need to take responsibility and not wait around for someone else to do what we know needs to happen. The difference is going to be made by companies like EQT that won’t just take the path of least resistance.