Companies that see Environmental, Social, Governance (ESG) as a box-ticking exercise fail to see its intrinsic value. But investors do not share this oversight.

Recently, investors worth $6.8trn pushed back against recent ESG regulation rollbacks in the EU. Why?

I wanted to peel back the statistics and listen to what’s happening on the ground. That’s why I spoke with Marcus Ward, Investment Director at Inflexion, to uncover why ESG is shaping capital decisions and how businesses can use it to gain a competitive edge.

Accelerating value creation at Inflexion

Marcus brings a sharp banking background to scaling enterprises. He saw how value creation happens on a day-to-day basis within a business. Joining Inflexion enabled him to accelerate that impact. For him, working ringside with the people who have spent their lives cultivating something special is a privilege.

Inflexion is a European private equity (PE) firm managing over £16 billion in assets. It backs ambitious businesses like Virgin Experience Days, Wood Thilsted and Medik8. Unlike PE corporations that pursue cost-cutting or turnarounds, Inflexion’s approach is to accelerate growth.

Sustainability is becoming increasingly foundational to this growth strategy. A well-defined ESG strategy, Marcus says, is often indicative of a well-run company/.

Marcus reports that their portfolio investors haven’t asked them to halt their green focus. ESG standards are enduring. The UN Principles for Responsible Investing have existed since 2005, unaffected by winding discourse.

Despite current fluctuating macroeconomic conditions, the green trajectory prevails. For companies, ESG is the index fund of strategic priorities, promising low risk, long-term growth.

Why do investors care about ESG?

By definition, sustainability means meeting the needs of the present without compromising our ability to meet the needs of the future. Long-term success is an attractive proposition for any investor.

According to Marcus, several forces are driving the investor focus on ESG:

• Investor expectations – “We’ve noticed increasing demand from our own investors that this is important to them. That trickle-down effect is how action become permanent and adopted as commonplace vs reactive.”
• Value creation – “An ESG strategy makes a company intrinsically more valuable to the next buyer, irrespective of what that company does.”
• Employee proposition – “It’s a way to participate in the local community and engage employees. Ultimately, talent acquisition and retention are essential growth levers.”
• Competitive advantage – “ESG drives innovation, paving the way for a clear and defined strategy for growth.”

This is why 96% of Inflexion’s portfolio companies have identified UN Sustainable Development goals, 94% are tracking scope 3 emissions, and five have achieved B Corp status.

A well-defined ESG strategy is about maximising growth. Companies that embed sustainability are 52% more likely to outperform their peers on profitability.

Maximising growth vs. risk mitigation

I, like many, assume ESG is anchored in future-proofing through risk management. Reporting standards, such as the European Sustainability Reporting Standards adopted by EU regulation, are designed to give investors a holistic view of their climate-related risk. In doing so, they can smoothly channel capital flows towards a low carbon future.

As Marcus correctly points out, “risk mitigation is done on a case-by-case basis. Opportunity maximisation is universal.”

Inflexion conducts ESG due diligence to assess risk exposure around working practices or environmental impacts. However, its true purpose is to build a blueprint for growth. It does this by encouraging companies, like Medik8, from treating ESG as compliance activity to engaging strategically as a driver of future growth.

Case study: L'Oréal to acquire majority stake in Medik8

ESG provides a blueprint for long-term value creation. When Inflexion sold the majority share in portfolio company Medik8 to market-leader L’Oréal, ESG was a decisive factor. For example, achieving B Corp certification underscored Medik8’s growth strategy, alongside establishing a strong C-suite and board.

What this means for ERP platforms

ESG is about opportunity maximisation. Discussing this with Marcus has made it clear that by embedding sustainability, businesses can significantly increase value for their customers and investors. It’s about going beyond futureproofing and building a blueprint for thriving in a low-carbon economy.

This is why logistics and spend management platforms embed Lune’s emissions intelligence. They are using ESG as a growth lever. By accelerating their customers' sustainability goals with real-time emissions reporting, they’re creating sticky, high-value features that resonate with both leadership and sustainability teams.

Case study: 200+ Payhawk customers adopt emissions tracking feature in less than six months.

Thank you to Marcus and the Inflexion team for their valuable insights. To learn more about how Inflexion is backing green ambition, visit their website. To stay up-to-date with the latest insights into emissions intelligence, subscribe to Lune’s newsletter.