Measuring Financed Emissions

From our inception, we have measured firm-level emissions, as well as all our portfolio companies’ emissions. We began working with Gravity, a carbon management software platform, to measure our carbon footprint in April 2023 and completed the exercise in June to meet our annual reporting deadline.

Our portfolio companies are busy with day-to-day operations and are often unaccustomed to ESG metrics, so measuring emissions is not always top of mind, which made it crucial for Gravity’s process to be painless and efficient. With their help, it allowed us to measure emissions across fifteen companies in two months. Gravity’s quality assurance process also enabled proactive identification of discrepancies in underlying data that would have impacted the accuracy of our results.

Giving Our Portfolio the Power to Respond to Disclosure Requests

During our 2023 measurement process, Madelyn Tutewiler, Director of ESG, said that she “noticed that our companies were getting more disclosure questionnaires from customers and more requests to fill out details about their ESG programs.” She estimated that half of our portfolio had mentioned pressures from customers to disclose emissions data. Madelyn went on to discuss that although we have continued to advise our portfolio of the need for ESG measurement, many companies assumed that they would not be impacted by disclosure requests because of their industry.

Fortunately, with our consistent measurements and utilizing Gravity’s platform, our portfolio companies had the emissions data on hand and were able to respond to these disclosure requests in a timely manner.

Creating a Decarbonization Action Plan

While measuring operational emissions was important to us, we were far more interested in driving value through decarbonization – both in terms of emissions reductions and cost savings. With Gravity’s help, we have been able to create customized decarbonization plans for some of our portfolio companies and continue to develop plans across the portfolio.

One of our portfolio companies that found immense value from this process was Race Winning Brands, the leading manufacturer of performance parts for the automotive and powersports market. Within six months, they implemented several decarbonization projects that both reduced emissions and provided positive ROI across all their sites. Since their operations are complex, but their sustainability team is small, Race Winning Brands’ Sustainability & ESG analyst Grace Dumot guided them by tackling one project at a time throughout their sites.

These recommendations ranged from furnace insulation to waste heat recovery and more, but switching to LED lighting was the first project selected since proven results had already been seen at one facility. She also initiated a waste heat recovery program at Race Winning Brands by installing more energy-efficient air ducts, which in turn improved employee comfort and lowered natural gas consumption by at least 5%. In winter months, the new ducts route hot air into parts of the building that run cold, and in the summer months, warm air is sent directly outside. While our main intention was to keep employees comfortable year-round, the reduction in natural gas spending was a bonus. We are proud of Race Winning Brands and our entire portfolio for their desire for forward progress and value creation.

Overall, this process helped Race Winning Brands establish its baseline footprint and identify areas for incremental improvement. “For us, it’s about knowing where we are, then we want to make sure we’re chasing the right things and really putting our energy around the things that drive the most value,” said Brian Jackson, Chief Human Resources Officer at Race Winning Brands. Forward progress and creating value are always the goals.

The Values of Sustainability

Race Winning Brands is just one example of how we are unlocking action within our portfolio. By pursuing cost-effective decarbonization, our portfolio companies can operate more efficiently and help their upstream, often publicly traded OEM customers meet their own carbon reduction goals. On the fund side, we can reduce our financed emissions, while creating value and returns on our investments.

“Increased focus on sustainability can no doubt drive immediate efficiency and profit enhancements — but we also believe it is bolstering our portfolio companies’ competitive positions over the longer-term as its benefits get passed along to valued customers as reduced cost inflation.” – Justin Steil, Partner

Continued Partnership and Impact

After six months of partnership, we have seen immense value in focusing on carbon tracking and solutions. “[Gravity is] the third group that we’ve worked with to conduct carbon footprints and by far have surpassed the expectations and really gone above and beyond, so we’re really excited to continue looking into decarbonization and moving forward,” said Tutewiler.