How Ambienta Invests in Environmental Sustainability for Top-Decile Private Equity Returns | Stefano Bacci, Partner & ESG Manager (#024)

SRI360 | Socially Responsible Investing, ESG, Impact Investing, Sustainable Investing

In this episode, I sit down with Stefano Bacci, Partner and ESG Manager at Ambienta, a private equity asset manager that was purpose-built to pursue environmental sustainability investing in resource efficiency and pollution control. Ambienta is the largest private equity fund manager in Europe dedicated to investing entirely in environmental sustainability.
Stefano grew up in Milan, (despite maintaining that he is culturally from Tuscany!). When choosing his career path, he was advised by his parents – both chemists – not to follow in their footsteps if he ever wanted to make any money (!) which led him to study Chemical Engineering at the Politecnico di Milano. He then went on to complete a PhD in Physical Chemistry at the Technische Universität Darmstadt in Germany.
Stefano’s early career took him to Switzerland where he worked for Ciba-Geigy (later acquired by BASF) in numeric modelling. Five years later, a chance conversation with a fellow graduate from his Ciba-Geigy induction period led him to study for an MBA, starting in Helsinki, then transferring to MIT in Boston.
Following his MBA, Stefano spent ten years working in consultancy at the Boston Consultancy Group, which brought him back home to Milan for a year, then on to Stockholm, then to Helsinki where he set up the BCG office and finally to Germany where he spent several years working in the run-up to the ‘dotcom bubble’. It was at this juncture in his life that he decided to switch to investment management and began working at Palamon Capital Partners, where he spent several years, before returning to Italy to work with Ambienta.
In this episode, Stefano takes us on a journey from his studies in chemical engineering right through to the point when Ambienta co-founders Nino Tronchetti Provera and Rolando Polli convinced him that sustainability was the way forward. We learn more about these two people who inspired him in his early days at Ambienta and how his passion for sustainability has grown over the years.
We discuss how Ambienta considers sustainability and ESG as two very different things, and how they invest in businesses where resources are used more efficiently in order to reduce pollution, waste in landfills and improve air and water quality. We discuss how Ambienta measures the impact of their investments, their typical investors, why sustainability is primary in their investment selection, and much more.
I really learned a lot chatting with Stefano, whose passion for environmental sustainability is clear. I hope you enjoy listening to our conversation!
About the SRI 360° Podcast: The SRI 360° Podcast is focused exclusively on sustainable & responsible investing. In each episode, Scott Arnell interviews a world-class investor who is an accomplished practitioner from all asset classes. In my interviews, I cover everything from their early personal journeys—and what motivated and attracted them to commit their life energy to SRI—to insights on how they developed and executed their investment strategies and what challenges they face today. Each episode is a chance to go way below the surface with these impressive people and gain additional insights and useful lessons from professional investors.
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Luvut

1. Episode introduction (00:00:00)

2. Stefano talks about his studies and early career, taking us on a journey from Milan to Germany, to Switzerland, Helsinki, Boston and then Stockholm. (00:02:19)

3. Why Stefano chose to study Chemical Engineering. (00:03:43)

4. Stefano tells us why he chose to do an MBA, starting off in Helsinki and then transferring to MIT in Boston. (00:05:23)

5. We hear about Stefano’s time at the Boston Consulting Group. (00:07:17)

6. Stefano shares how he made the switch from consulting to private equity investment. (00:08:52)

7. Stefano talks about his time with Palamon Capital Partners, his role there, and his subsequent move to Ambienta. (00:10:44)

8. We hear about Stefano’s path into the field of sustainability and the individuals who inspired this. (00:12:53)

9. Stefano gives us an overview of Ambienta and the Ambienta I, II and III Funds. (00:16:56)

10. Ambienta’s ‘Environmental Impact Analysis’ methodology and how it is used to measure the impact of their investments. (00:17:45)

11. We hear about Ambienta’s move into public equity and find out more about their public market fund ‘Ambienta X’. (00:20:22)

12. Stefano talks about the differences between ESG and sustainability, and how Ambienta’s entire investment strategy is based on sustainability, in particular resource efficiency and pollution control. (00:24:06)

13. We discuss the use of proprietary sustainability metrics to measure impact and Stefano shares how Ambienta are unique in using eleven different environmental metrics to measure what makes a business environmentally sustainable. (00:28:00)

14. Stefano shares an example of a private equity investment that Ambienta has made, which is fully aligned with their sustainable investment strategy. (00:31:10)

15. Stefano talks more about Ambienta’s ESG approach, and their ‘ESG in Action’ program, which acts as both a risk management and value creation tool. (00:36:42)

16. We hear about Ambienta’s typical investors, and Stefano’s prediction that in the future, Ambienta’s ESG credentials will attract a general public that is becoming more and more ESG conscious. (00:45:36)

17. Stefano talks about the decoupling of ESG and sustainability, and the need for each to be managed differently. (00:46:43)

18. We discuss the impact of technology on sustainability and Ambienta’s biannual publication, the ‘Ambienta Lens’, which reports on new findings and perspectives in the field of sustainability. (00:50:43)

19. The single most important challenge in the sustainable investment space. (00:51:56)

20. What Stefano knows now about sustainable investing that he wishes he had known when he joined Ambienta. (00:52:26)

21. Lessons learned from investments that didn’t work out as planned. (00:54:11)

22. Stefano gives his advice on how to break into the sustainable investment space. (00:57:13)