Portfolio management and exits
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Introduction
Portfolio impact management
Checklist of questions
After investing in a company, portfolio managers have three mechanisms by which to achieve gender and climate impact:
Portfolio management and measurement: requirements that investee companies track and report against agreed gender and climate indicators vs milestones in legal documentation.
Value-add opportunities: working with investee companies to deliver the positive gender and climate outcomes articulated in action plans.
Exits: assessing how exiting from an investment might impact gender and climate outcomes and returns on investment, and developing a strategy to ensure impacts are monitored and delivered following an exit.
Gathering information and learnings during the portfolio management phase, as well as after a successful exit, can provide evidence of the benefits of gender and climate lens investing. This can generate valuable data to inform future investment strategy and processes, further make the case to IC/Board members (see Step 4), and support advocacy efforts to grow the field of gender and climate investing.
Introduction
During portfolio measurement, Fund managers can require investee companies to track and report on gender and climate indicators, and monitor whether gender and climate-based milestones are being met. Fund managers can do this by (1) requiring annual self-reporting by the investee company; (2) conducting company visits; and (3) deep-dive evaluations where baseline, endline data are collected and analysed before, during and after a gender and climate intervention.
Examples of metrics that investors may want to collect for their gender-smart climate finance investments across various sectors can be found in the impact measurement section of this toolkit.
Exits
While the field of gender-smart climate finance investing is still growing, investors are starting to consider how to track, measure and monitor gender outcomes after exiting a climate finance investment. Even though there are a few good practice examples documented to understand and define a successful gender-smart exit from a climate finance investment, investors can draw on similar exit approaches from the impact investing and ESG space.
The key steps that can be taken to maximise gender and climate outcomes in exits are as follows:
It is important to demonstrate to potential buyers that the investee company’s commitment to gender and climate can lead to increased valuation and is an asset
Demonstrate that systems, processes, and people the investee company has put in place on gender and climate activities will continue to perform
Aim to attract buyers who share the same values and are committed to gender-smart climate finance investments.
Prepare investee companies for questions from prospective fund managers
Prepare gender and climate analysis and reports
Portfolio impact measurement
During portfolio management
Is the portfolio management team equipped to monitor and report on climate finance and 2X criteria?
Do your portfolio companies need support in monitoring, reporting, or delivering on agreed climate and gender goals?
Are you identifying, managing and mitigating climate and gender risks in your portfolio?
Are you encouraging your portfolio companies to share data or testimonials on business benefits or positive impacts?
Questions to consider
When exiting an investment
Have you developed a strategy to ensure that your exit from the investee company won’t prevent it achieving its gender and climate impacts? For example, by working with the company to put processes, and people in place for continuing its climate and gender activities.
Have you collected evidence to show that the investee company’s commitments to gender and climate are a premium asset?
Have you sufficiently prepared your investee company to pitch the value of its gender and climate impact strategy to prospective new investors?