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2023 Deloitte Private Equity Index

The measure of performance across the triple bottom line of people, planet, and profit

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The Deloitte Private Equity Index looks beyond profit to provide an assessment of the impact the UK’s PE-backed companies are having for people and planet too.

In our evolving economy pressure on corporates to drive improved working conditions and adopt operating strategies which reduce both emissions and use of nature capital is ever increasing.

The Deloitte PE Index provides a benchmark of performance across people, planet, and profit helping sponsors and company management assess performance against peers and identify areas for value creation within portfolios.

Introducing the Deloitte PE Index

In creating the Deloitte PE Index we assessed 92 companies across 5,500 data points to define a score for each of people, planet and profit, with a maximum of 100 for each category for a total of 300. By intentionally evenly weighting each of the three “P’s”, we set out to understand the balance between metrics and how investing in one area might impact others.

The amalgamation of these results is what has created the PE Index for the consumer sector.

The lack of transparency and consistency in reporting of the non-financial metrics – a key finding not only of this exercise but also of the Deloitte ESG in Private Capital Survey – made assessing performance a labour-intensive endeavour, taking several months to complete.

It is clear that companies are struggling to balance their impact across the three dimensions of People, Planet and Profit.

People

"Positively impacting all stakeholders"

Key metrics included: employee growth, gender pay gap, females as a proportion of management, supplier code of conduct, pension contribution and others.

Planet

"Protecting our natural capital"

Key metrics included: environmental policies on water, biodiversity and circularity, net zero ambition, reduction in absolute emissions / emission intensity, renewable energy use and others.

Profit

"Maximising economic impact"

Key metrics included: EBITDA growth and margin, wages, social security as a proportion of revenues, return on capital base and others.

Painting a picture of an economy in transition

It is clear that companies are struggling to balance their impact across the three dimensions of People, Planet and Profit.

Even the highest-ranked company within the Index was challenged to score consistently across all three metrics, achieving scores of 69% for profit and 68% for planet - but just 38% on the people metric. However, a total of 16 companies (17% of the total index) did expand margin, grow headcount and also reduce absolute direct GHG emissions; a strong indication of achieving the triple bottom line .

Performance across the board varied, with some stand out figures demonstrating the opportunity for companies to not only improve their rating but add value in doing so. There is a growing divide between those companies creating value for multiple categories of stakeholders and those that are not.

People

2.7%

Median employer pension contribution. Employees appear to be opting out of company pension schemes.

10.5%

The weighted average mean gender pay gap for indexed companies - lower than the UK average of c.13%.

5%

The proportion of companies in the index led by females. This lags behind the FTSE100 (10%) and the FTSE250 (6%).

Planet

33%

The proportion of companies who reduced absolute direct greenhouse gas emissions.

54%

The proportion of companies assessed with a publicly-stated net zero ambition.

85%

The proportion of companies that are yet to assess their climate impact on a TCFD basis.

Profit

4x

Companies with a Female CEO had four times higher EBITDA growth (33% compared to 8%) and marginally higher YOY employee growth.

5.8%

The median annual growth in employees for the indexed companies.

70%

The proportion of companies who scored more strongly in profit than any other metric.

“Ultimately private equity value creation is a factor of a multiple and profit. While not all triple bottom line investment will maximise profit, we expect that in the future, companies who can deliver people and planet value can achieve a higher multiple (or lower discount factor) and therefore a higher equity value than those companies who focus solely on profitability.”

Anne Marie Laing Consulting Lead Partner for Private Equity, Deloitte

Dive into the detail of the Deloitte PE Index

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Looking forward

While this iteration of the Deloitte PE Index has focussed on consumer businesses, we intend to further automate data collection, and allow sponsors/companies to submit their data directly, allowing us to expand the number of companies and industries we analyse in future. The benefit of an independent, consistent peer read-across should enable the sector, as a whole, to continue to drive transformational impact.

As data quality and availability increases due to shifts in market expectations and widening regulations, such as the Corporate Sustainability Reporting Directive (CSRD), Task Force on Climate-Related Financial Disclosures (TCFD) and Task Force on Nature-Related Financial Disclosures (TNFD), the Deloitte PE Index scoring and ranking will become an ever more reliable benchmark for value creation in private markets.

The metrics we chose for assessment have been identified as being of critical importance to PE houses, investors, and companies, like those in the ESG in Private Capital Survey and the ESG Data Convergence Initiative.

In future iterations of the index, we look forward to adapting these measures and the baseline expectations behind them to focus more on action and improvement, as companies continue to embrace a wider definition of value in their strategies and operating models, and improve the transparency and reliability of sustainability reporting.