Oak Hill Capital Continues to Chart the ESG Course for Middle-Market Private Equity Firms

Last year, Oak Hill Capital Partners released its inaugural environmental, social, and governance (ESG) performance report. While you may have read about similar reports from private equity firms like KKR and The Carlyle Group on this blog, Oak Hill Capital’s report was significant because it were first among U.S. middle-market private equity firms to publicly release an ESG performance report. In doing so, the firm increased transparency and offered other mid-market firms a blueprint to follow. Last week, it issued its second annual report, offering an inside look at the firm’s progress to date.

Oak Hill Capital Partners logoA comprehensive approach

In its new report, Oak Hill Capital outlines its approach to ESG management, measuring progress in integration, results and leadership: three of the key building blocks for a successful ESG management program that are included in our ESG Management Tool for private equity.

For Oak Hill Capital, integration refers to the ways it embeds ESG management practices across the firm’s operations to ensure it can best deliver results at portfolio companies. Key examples from the report include its responsible investment policy, incorporation of ESG in due diligence, and its recently becoming a signatory of the United Nations Principles for Responsible Investment (UNPRI). Management of environmental performance is also woven into the management of the firm, through its ESG Committee, which is made up of senior executives and chaired by Oak Hill Capital’s general counsel.

Results speak to how the firm evaluates the ESG performance of potential new investments and how it tracks and supports the sustainability efforts of portfolio companies. This year’s report includes how the firm considered ESG factors in the due diligence process of three new investments and how existing portfolio companies have benefited from the firm’s expertise in ESG issues. One example is an energy efficiency project Oak Hill Capital initiated at its portfolio company, Dave and Buster’s, with Entouch Controls, a leading energy management solution for restaurants and schools.

Lastly, Oak Hill Capital takes a broad approach to leadership, both within the industry and in the communities in which it operates: promoting lessons learned among similarly-sized firms, as well as engaging employees in business-focused mentorship opportunities.

A diverse portfolio of sustainability initiatives

Oak Hill Capital considers a diversity of ESG issues and this year’s report provides several in-depth case studies, emphasizing how it evaluated the environmental performance of new investments and how it supports the efforts of companies already in its portfolio:

  • Pulsant: A U.K.-based data center host and IT infrastructure provider, and new Oak Hill Capital investment, Pulsant impressed the firm with its advanced approach to energy management, including sourcing all its electricity from renewable sources and making significant improvements in energy efficiency.
  • The Hillman Group: Another example of the driving force of energy efficiency, the company hosted an EDF Climate Corps fellow to uncover opportunities to save energy in its warehouses and offices. Recommendations made by Climate Corps fellow Gary Gao could pay off to the tune of cutting the company’s energy use by 20% and reducing carbon emissions by 600 tons annually. The Hillman Group is the third Oak Hill Capital portfolio company to host an EDF Climate Corps fellow, continuing the trend established in 2011 by ViaWest and Dave & Buster’s.

Success builds on success

When EDF and Oak Hill Capital partnered two years ago, we showed that opportunities to align financial and environmental benefits are available for private equity firms of all sizes. Oak Hill Capital’s second ESG performance report proves that its initial wins were not beginner’s luck and that sustained attention to ESG management can yield increasing success over time.

For companies feeling inspired to see how they could benefit from an increased focus on ESG measurement, we recommend checking out EDF’s ESG Management Tool for private equity firms, which describes the kind of management practices needed to ensure a robust ESG program.

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