Partners Group Holding AG (PGHN) Earnings Call Transcript & Summary

Welcome to Partners Group's Annual Corporate Sustainability Update, and thank you for joining us today. My name is André Frei, and I'm hosting this call as Partners Group's Chairman of Sustainability. We're excited to share highlights from our recently published corporate sustainability report with you today. I hope you had a chance to have a look at it. I believe it provides a very comprehensive overview of our environmental, social and governance, ESG, performance across our investment portfolio and at corporate level in '21. '21 was an active and important year in Partners Group's sustainability journey. After many years of implementing manifold initiatives, '21 was the year where we consolidated our efforts into one overarching sustainability strategy. The strategy really combines our existing frameworks around ESG and sustainability with a road map for the next phase of Partners Group. It articulates our vision of creating positive and lasting impact for all our stakeholders at corporate level and our vision of building better and more sustainable assets and companies at portfolio level. In the next 30 to 45 minutes, I will first talk you through our sustainability strategy. My colleague, Carmela Mondino, Head of ESG, will present ESG achievements but also challenges from our portfolio last year. She will be joined by Sujit John, a Managing Director in our private equity, health and life article, who will present an ESG case study to us. And after that, Kirsta Anderson, our Chief People Officer, will talk about the social dimension of ESG at corporate level. And as always, we will end today's call with a Q&A session. I look forward to your questions later on. Let us move to Slide 4. Many of you know that Partners Group has a long history of responsible investing. If you know Franz Humer, you know that sustainability is really important for us as a leading private market investment manager. And that is why oversight for sustainability topics lies with the most senior levels of our organization. Our Board of Directors is actually responsible for Partners Group's sustainability strategy, including oversight. Our executive team is responsible for implementing the sustainability strategy. Amongst others, they define and control sustainability-related roles and goals. As Chairman of sustainability, it's my role to collaborate closely with the executive team and Carmela, as Head of ESG, to drive forward the sustainability strategy at firm and portfolio level. Our ESG team develops and implements operational governance and control frameworks. They also advise and challenge investment teams and the portfolio companies on ESG initiatives. I believe that this setup is very clear, and it allows Partners Group to drive ESG impact through a clear and dedicated governance structure. Slide 5 illustrates our long-standing commitment to sustainability. You know that since 2006, when we first established our ESG and sustainability directive, we have been a committed leader in responsible investing. And I believe we were one of the first private market investment firms to sign the United Nations Principles for Responsible Investment. Since then, of course, we have to continuously evolve our approach, and we have received the highest possible rating from UN PRI for our ESG and sustainability strategy and governance for 6 consecutive years. 2016 was a milestone. Already back then, we developed and implemented our proprietary ESG due diligence tool, which is based on the SASB metrics. So with this tool, Partners Group incorporates ESG into our investment decision-making process, which is the first step. Later on in 2020, you see that we published our climate change strategy, which is aligned with the TCFD recommendations. And in line with our commitments, we published our first TCFD report recently. Finally, we were pleased to be included in the Dow Jones Sustainability Indices last year as the only global private market firm and among a bit more than 300 listed firms globally. This marks an important recognition, I think, of our corporate sustainability leadership within our industry. Let's move to Slide 6. In 2021, we decided to take our commitment now one step further by developing a comprehensive sustainability strategy that covers both our portfolio and our firm. The strategy really articulates our vision of becoming an impact leader in corporate responsibility to the benefit of our employees and other stakeholders like the environment, for example. Our clients, investors and employees are keen to understand how this vision looks like for our firm and our portfolio. For both of them, we have defined environmental, social and governance ambitions. I believe that these ambitions, because they're combined with targets that are tangible and clear projects that we will talk about later, present a very systematic and thoughtful approach to building sustainability at scale across our broad and deep platform, always with a focus on the most material topics and through ESG impact. At the corporate level, which is shown on the left-hand side, our vision is to create positive and lasting impact for all our stakeholders. Our corporate sustainability ambitions include our carbon reduction program to achieve net-zero emissions by 2030 as well as efforts to realize our employees' potential and to become a role model in entrepreneurial ownership that we often talk about on this call. At the portfolio level, our vision is to build better and more sustainable assets and companies. Our ambition focuses on implementing our climate change strategy and Stakeholder Benefits Program as well as achieving sustainability at scale. We move to Slide 7. On the environmental dimension of ESG at portfolio level, our goal is to create long-term value by both investing in the low-carbon economy and leading assets on the path to net zero. These 2 parts of the ambition show that sustainability can happen both through differentiated thematic sourcing of investment opportunities based on deep sector research before we acquire assets and companies in specific sectors as well as through active and entrepreneurial ESG ownership and governance of existing investments in our portfolio. Both is part of our transformational investing approach. Now many of you are familiar that decarbonization is a giga theme for Partners Group, which drives our thematic sourcing efforts. According to our own research, up to $50 trillion of decarbonization infrastructure investment will be required by about 2040 to achieve the Paris Agreement objective. Private capital will invest in these areas of carbon, replacement, conservation and management. As a firm, we have already been very active in this space since more than 20 years, and we made more than 25 investments. If you would like to learn more about that, I invite you to read the thematic research referenced in our corporate sustainability report. In our sustainability strategy, however, we do not single out or restrict ourselves to decarbonization assets. More generally, our strategy applies to and thus focus on our controlled assets, starting with our private equity and infrastructure business. On Slide 8, I would like to now give you an overview of the key ESG targets that we have defined at portfolio level. I will highlight just a few, and let me start with governance. Our ambition is to realize sustainability at scale, as shown at the top right of this slide. For the assets and companies that we own on behalf of our clients and that we control as majority shareholders, a first natural step is to establish a clear ESG governance structure. Our plan is to always appoint 3 leaders who are responsible for ESG at asset level: one leader at Board, one at executive and one at operational level. And together with these 3 leaders, Partners Group wants to develop a meaningful ESG journey for these businesses based on strategic ESG initiatives with meaningful impact. And it's clear that these ESG initiatives must be on the Board agenda, just like traditional business initiatives. Let us look at our environmental targets in the left column. We said 4 areas that we expect our portfolio companies to focus on during our ownership. First, we expect our portfolio companies to measure and assure the greenhouse gas footprint, which is, of course, just a starting point. We expect our companies to develop a greenhouse gas reduction strategy to reduce carbon equivalents by 50% by 2035, on average, which is an interim milestone on the path to net zero. And we expect them to meaningfully reduce emissions already during our ownership period. We also expect environmental efforts to ultimately move beyond carbon, starting with an assessment of the broader environmental footprint focusing on material topics, such as managing water resources and biodiversity. On the social side, please look at the middle column, our target focus on topics such as employee engagement and diversity and inclusion. The one target I would like to highlight is the Stakeholder Benefits Program, which you already know from prior communications. Our goal is to build companies that employees decide to work for and want to achieve this by reinvesting substantially into education and development, health and safety, financial or well-being initiatives. We will, going forward, institutionalize our approach to Stakeholder Benefits Programs based on our experience made with past pilot programs. If you take a moment to step back and look at this set of 12 goals, I hope you agree with us that this will be a pretty comprehensive ESG journey that are not straightforward. They are clearly requiring multiyear effort. Our assets will share common ESG standards, as you see, but we'll also allow them to be unique in their respective ESG journeys. Let me conclude my part of this presentation by sharing the corporate-level targets on Slide 9. Our ambition on the governance side is to become a role model in entrepreneurial ownership and governance for our peers and portfolio assets. Our targets include diversity at Board level and linking executive compensation to ESG. An important area is also to refine our ESG strategy, governance and control framework to meet the very high standards set out by the UN PRI. Furthermore, new regulations, like SFDR, this is the European Sustainable Finance Disclosure Regulation, requires the private markets industry and Partners Group to become more formal and systematic. Over the past 2 years, we have already taken significant steps to prepare for upcoming ESG regulation, but more work will be needed. So reality is that Partners Group will invest substantially behind the scenes to lay a solid foundation to ultimately realize sustainability at scale, at firm and portfolio level. On the environmental side, again, the left column, we want to look -- we want to launch a carbon reduction program as a firm to achieve net-zero emissions for our greenhouse gas emissions by 2030. You see that this is an ambitious time line. We plan for carbon reductions by switching to renewable energy where possible and offsetting as the last resort. And we will fund our contributions to nature-based solutions with an internal carbon price of $50. We also plan to develop an ambitious decarbonization program for Partners Group using our own expertise and available technology-based solutions from our portfolio companies, for which we have given ourselves 2030 as the time line. So I stop here. My colleague, Kirsta, will dive deeper later on into the social ambitions and targets in her presentation. But first, I would like to hand over to our Head of ESG, Carmela Mondino, to talk you through some of the portfolio ESG highlights and challenges in 2021. Over to you, Carmela.

Thanks, André. Now if we go to Slide 11, I would like to talk just a bit on our ESG investing framework, so [ completing ] on the portfolio now. As a firm, we hold ourselves to the highest standards of ESG, and we do so by integrating them in our transformational investment strategy. We have 100% of our AuM covered by our ESG and sustainability directive, and this means that we have an ESG approach for each type of asset class and investment strategy. And this is throughout the investment life cycle, so from sourcing all the way to the ownership period. As André mentioned, our thematic investing approach includes really a focus on sustainability giga theme in terms of decarbonization, and it's what drives our investment professionals in what they should source as it relates to ESG. Now if we focus on the slide on the screen, on the left, you have our noncontrolled investments. And our investment philosophy here is really characterized by a traditional ESG approach, what you would call stewardship. So it's really similar to the approach that is adopted in private markets. Now for controlled assets, to your farther right, our ESG approach goes really beyond this. We have a strategic ESG approach based on our active ownership approach. And this is where my team has the most fun and the investment team have more fun because as an active owner, we can go beyond just excluding and drive ESG engagement and triggering change within our assets. We can do this because of our governance rights and because we have done this in the past, so we have expertise on the different ESG topics. And for this reason, we can really, not only enhance the ESG performance of the company, but we can also transform them into impact leader for specific ESG topics. Also, as active owners, therefore, we don't just focus on mitigating risk or protecting value, but we actually create value and build more sustainable businesses, which is what Partners Group ultimately wants to do. Now if we go to Slide 12, in 2021, we published our fourth ESG Dashboard, and this is how -- what we use to report on our ESG performance. We collect this data through our annual ESG KPI survey, which we come back through our direct lead and joint lead investments. And this focuses on key ESG topics and lets us track our asset ESG performance. Now we define these KPIs based on the SASB standard. So we see a lot of very different industries throughout our portfolio, but the idea is that we focus on the most important topics for each one of them, while at the same time, having a portfolio-wide deal. And this is important because, that way, we have increased transparency which helps us communicate with our clients and other stakeholders, but also here, ESG projects within the portfolio companies and communicate on our expectations based on the progress that the companies make. Now something, as I said, is very important to us is materiality, so that's why there's a color coding here. The light boxes indicate relatively low materiality topics, while the darker shades of blue indicate high materiality. For metrics, they are, we would say, more qualitative in nature. We -- like environmental management or the cybersecurity approach, we conduct maturity assessments. And we give each company score from 1 to 4 based on 4 dimensions with 1 indicating a low level of maturity and 4 indicating best practice. Now for assets that having the portfolio for more than 1 year, we also include arrows to indicate the company's performance. That way, we don't need to put the 2 dashboards one next to the other. And this is important because we do it year-on-year, and each company prioritizes a subset of these topics every year. And this is -- these are the darker boxes that you see around metrics. We publish our dashboards for private equity and for private infrastructure. And as I said in the beginning, this is the fourth year we do this, so we can identify positive trends but also opportunities for improvement. If we focus now on our priority key dashboard, one that is on the screen, some key areas that we would like to highlight are on the environmental side. We still need to do some more work on waste, and this is a challenge for companies in a broad range of industries. On the social side, we are happy to say that we have improved health and safety metrics in around 35% of our portfolio. So that's a positive contribution towards our portfolio company's employees. And then on the governance side, we will continue our focus on entrepreneurial governance. Now if we move to the next slide, Slide 13, please, and now looking into our infrastructure portfolio. Here, we see opportunities for improvement on the environmental side, for instance, by increasing our emissions data coverage. On the social side, we actually made a big improvement on community engagement and reduced community complaints, and this is a key topic for any construction asset. But on the governance side, we also see an opportunity for increasing ESG transparency by reporting on broader ESG performance and having dedicated reports. Now this is the general view by my colleague, Sujit John, a Managing Director in our private equity, health and life vertical. We'll conclude the ESG section of the portfolio by walking you through an example of our ESG engagement work with a company called PCI, and this is on Slide 14. Sujit was a Board member at PCI, facilitated the ESG engagement with them and knows the company inside-out, so he should have a lot of insights to share.

Thank you, Carmela. A key part of our ESG work is engaging with portfolio of companies [ on improvement ] projects on topics that are highly material to them. One example of the work we carried out with the PCI Pharma Services to manage its group's health and safety and waste and energy management. We acquired PCI Pharma Services on behalf of our clients in July 2016 and sold our majority stake at the end of 2020, although we still hold a significant minority stake and are active on the value creation front. PCI is a global provider of outsourced pharmaceutical supply chain solutions supporting biotechnology and pharmaceutical companies throughout the various stages of drug development and commercialization. The company has over 25 good manufacturing facilities globally and almost 4,000 employees. During our ownership period, we worked with PCI on a broad range of value creation initiatives. One key focus area was waste management. PCI manages large amounts of paper and plastic, which ultimately turn, in some proportion, to scrap. During our ownership, PCI reduced its scrap percentage to below 3% and increased its recycling rate to over 75% with a target to reach 100% in 2021. This had an estimated EBITDA impact of USD 0.9 million, and it helped the company improve its EcoVadis sustainability rating to Gold. PCI also engaged with an external energy management consultancy to identify low- and no-cost measures to reduce its energy consumption and related greenhouse gas emissions. In 2019, the company also began holding a biweekly environmental management system steering team meetings geared towards improving conservation performance across the company. The measures implemented achieved a 15% reduction in energy consumption with an estimated EBITDA impact of USD 1.6 million. Finally, ensuring the well-being of company employees is an important part of a manufacturing company's operations. And during our ownership, PCI committed to standardizing best-practice health and safety initiatives. The company is now working towards continuous improvement in its total recordable injury rate and lost-time incident rate performance and managed to reduce its total recordable injury rate from 1.7 in 2019 to 0.7 in 2021 and its lost-time incident rate from 2.0 in 2019 to 0.5 in the same time period. To ensure continued commitment to these ESG focus areas, as part of our exit, we shared ESG materials and an overview of projects to be completed with new lead investors. Today, as a minority investor, we remain committed to supporting PCI on its ESG journey. I'd like to highlight the ESG engagement work with PCI Pharma Services is just one example of the ESG work we were conducting with portfolio companies even before our sustainability strategy was [ online ]. In other words, strong ESG engagement has always been a part of our active ownership approach. With our new strategy, will be an even stronger focus going forward. I will now hand it back over to Carmela, who will give you some highlights across the portfolio.

Thanks, Sujit. I mean, in the beginning, the sound was a bit choppy, but I think if the audience wants to see the details, there's a case study on PCI in our reports. So please feel free to take a look, but thanks. Now to really wrap up the portfolio part, I will move to the next slide. We want to highlight that, as Sujit mentioned, this is something that we have been doing for a long time. And our efforts on PCI are not an isolated case study, but that such initiatives really persist across our entire portfolio. This overview that you can see on the slide shows the aggregated impact from our portfolio in different topics. We cannot really aggregate everything because our companies are really diverse, but there are some common themes. And for instance, that one of them is the energy saves, the CO2 emissions avoided or jobs created as well. This is data, again, that we collect throughout the same -- through the -- across the portfolio through the same ESG KPI survey we conduct across our direct leads and joint lead investments and is what enables us to measure key aspects of our ESG performance. With that, I would like to hand over to Kirsta for the final part of this presentation, which focuses on our corporate sustainability highlights. So Kirsta, back to you.

Thank you, Carmela. Turning to the next slide. As André mentioned at the beginning of the call, I'd first like to walk you through some of the key targets we've defined at the corporate level and some of the initiatives we've got to achieve those targets. The purpose of all of this is to realize our employees' potential and achieve our ambition of becoming an impact leader in corporate responsibility to the benefit of our employees and other stakeholders. And this is deeply meaningful and important to us because, as an investment firm, our success is grounded in our ability to see what others don't see and make good investment decisions. And that insight and decision-making comes from our people. So supporting our people's growth is really vital to our success. And that's why our social targets at the corporate level focus on topics that are really material to our people. So if I start to take you through some of those goals that we've got and the initiatives that sit underneath them, the first one is top-quartile employee engagement by 2025. And how we drive that is we've been, firstly, measuring employee engagement since 2019, and our survey breaks down the results to the cell leader level, so individual key managers in our organization, so they can work on those individually, but we also plan actions at a corporate level for topics that need improvement across the firm. We also then incorporate those into performance management in a couple of ways. First of all, since we started measuring engagement in 2019, the individual leaders' results on that survey have formed a key element of performance ratings on the leadership topic each year. And then secondly, this year, what we started doing is putting concrete goals based on the engagement survey results into leaders' goals for the year. And I'll speak a little bit more about that when we get into diversity and inclusion. Second key target that we've got is around equal pay for equal work globally, and this is something that we've been measuring for many years. But in 2020, we actually started and continued in 2021 to engage with external parties in order to ensure that our measurements are in line with global standards. And this most recent year, we started working with an organization called EDGE to do that measurement, and we found no unexplainable pay gap. The third goal is around ensuring that our teams reflect the local talent pools and societies that we operate in, and the way that we're doing that is through targeted recruitment campaigns. For many years now, we've had a couple of programs to recruit more females into our organization, which is a challenge across the industry, and then we've expanded that this year through a summer internship program that we'll also seek to bring representatives of a number of other underrepresented groups, such as race and LGBT+ status into the organization. Finally -- well, second to last, we aim for at least 25 female leaders in senior management by 2025, and I'll go in a little bit more detail into how we're aiming to achieve that in a moment. And then finally, our last goal is to relaunch our PG stakeholder impact effort. And there, what we're focusing on this year is actually streamlining and bringing together three initiatives that have started over the years to make them easier for employees to participate in and really have a meaningful impact with. So that, I think, summarizes our key initiatives in 2022 to continue to progress on these goals. If I take you to the next slide, what we would like to talk about is just a bit of a zoom-in on some of the topics that I've highlighted there, starting with employee engagement as this continues to be one of the key topics that we worked on in 2021. So as I mentioned, we've been measuring employee engagement since 2019. What we found in 2021 is that engagement was at 68%, which is below the target of 75%. But we have now remeasured, and we can say that we're on track to achieve our 75% target by 2025. The survey also helped us identify a number of areas to focus on, including hiring and resourcing and increasing resources to increase our hiring rate and then strengthening our commitments around diversity and inclusion, which I'll speak to in a moment. One area that we continue to place a strong emphasis on is empowering our people through learning, and that's our PG Academy platform. And we were really happy to see in 2021 that employee satisfaction with our learning and development offerings increased very significantly, and we continue to work on improving those in 2022 as well. So our platform, PG Academy, is a learning and development platform that offers flexible and scalable learning offerings with targeting business functional, technical leadership and personal development skills. And in 2021, we expanded that platform to match the scale of the firm, increasing the variety and the volume of our offering by 35% and the average number of training hours per person by 25%, which we were really happy to see. Another area of focus is finally diversity and inclusion. Our conviction is that the importance of diversity and inclusion to our business remains unchanged. We defined our conviction on this topic back in 2020. And in summary, since our founding, we have seen time and again that we make the best decisions when we collaborate, jointly explore and vigorously debate a range of viewpoints in order to achieve clarity of direction. And that requires both diversity of perspectives and inclusiveness in terms of how we consider those different perspectives. So going into that a little bit further. If we turn to Slide 19, you can see a summary of our conviction statement and also how we have expanded our Diversity and Inclusion Committee over the last year. I think what I'd like to highlight is this really is an employee-driven effort, and one of the ways that we've expanded the effort over the last year is expanding the focus on employee networks. So we now have 5 employee networks, which include a women's network, pride network, parents network, the Black network and the veterans network. And all of those networks are actively involved in -- partially in recruiting underrepresented members into Partners Group but also ensuring that the Partners Group that they join is an inclusive one, that is one where all people want to stay and build their careers. So we're very proud of the work that, that group has done over the last year. If we move to Slide 20, I promised a little bit more of a deep dive on our goals around representation. And in particular, right now, our focus is on gender diversity. So there, we are at, as you can see on the left-hand side of the slide, 39% of our employees across the firm are female, 38% in the Executive Committee. And then we've had some turnover in our Board this year, but we remain at 25% in 2021 and in 2022 at the Board level. In terms of hitting our goal, we're still not progressing as fast as we would like to. We are now at 12 out of 25 -- out of our goal of 25 female partners and managing directors. So there's a couple of things that we've done this year to accelerate progress. One is we have cascaded that overall goal into individual hiring goals by department so that there is increased accountability and ownership of achieving this goal from a hiring perspective. Then we also want to achieve this goal through internal progression, and there's 2 things we're doing there. One is expanding our approach to developing female talent to ensure that they are getting the development that they need to progress in their careers, and then we also continue to measure progression rates by gender across the organization to ensure that women and men are being progressed at equal rates, and I'm happy to say they are. In 2020 and in 2021, we've got roughly equal progression rates by gender, by male and female. So that concludes the social topics and initiatives. And with that, I'd like to hand back to André to conclude our section on ESG.

Thank you, Kirsta. Thank you also, Sujit and Carmela. And I believe this just ends the first part of this call. I believe I should, at this point, quickly hand back to Chorus Call, the operator, to explain how questions can be asked to all of us on the call.

Our first question comes from the line of Laurent Millet from Artemis Investment Management.

Can you elaborate on why you think you're on track to reaching 75% in terms of engagement? And could you clarify, I think you talked about recalculating the engagement score. Could you please clarify on where you are and where Partners Group kind of ranks compared to peers in the industry?

Sure. So I can't share too much more detail because we have just done our most recent survey and haven't shared the results with employees yet, and we feel it's important that we share with them first before sharing with everyone on this call. But what those results have shown is that we are on track for getting -- moving towards 75% by 2025. So I'll leave it at that and share more in next year's update, if that's all right, on the specifics. We aren't recalculating the numbers, so that might have been me misspeaking, but I'm happy to answer any follow-up questions. Certainly, we set the bar at 75% because we know that, that is what most high-performing companies reach. So it is above the sort of general industry norm and more at the level where high-performing companies that are strong on engagement and on financial performance achieve.

Okay. And in terms of the area maybe for improvement, when you look at the kind of details of the engagement survey, where do you think you have kind of more room for improvement? And where do you think Partners Group grows very well?

We tend to do very well on questions relating to customer-centricity and accountability and speed of decision-making. Where we're trying to improve is some of the areas that we've talked about here, and that's why they are focus, so diversity and inclusion is one where we tend to actually do very well on questions relating directly to inclusion, like employees feeling respected. We tend to be above the high-performing norm on those kinds of questions, but we still know that we've got more room to improve in terms of actually the numbers that we've got in our employee population that we've shared there. So that's one of our key areas of improvement. Another one is decision authority. So we, as a firm, have been fast and nimble in the past on the basis of a very centralized decision authority. As we become more global, it's important that we bring different perspectives into that decision-making. And so that's one of the key areas that we're working on as well.

It looks like we have no further questions on the phone, so we'll go to a few of the questions that have come through the webcast. The first. André, is the Stakeholder Benefits Program still in its pilot phase? And if so, what does the pilot scheme look like? And has it met its expectations or hopes?

Thanks for the question. I believe the pilots have been completed. So we are beyond the pilots now. The next step of the Stakeholder Benefits Program is really to formalize this into a more systematic framework that can be rolled out across our portfolio, that it can be governed by our portfolio company Boards. So I think based on the lessons learned, and I'm going to share 2 examples later, based on the lessons learned, it's now very natural that the Stakeholder Benefits Program is a key ambition focus area, a target of our broader sustainability strategy. So the intention has not changed. It's still the same scope as like -- as we had previously communicated. It's about dedication. It's about also environment, but it's primarily about social initiatives or also more straightforward financial support. And I believe the way I talk about it and the way we see it as a company that this is a real, brilliant example of a multiyear effort because it's one target that we want to apply quite broadly. We say that we want to really develop an institutionalized approach to our Stakeholder Benefits Program as a key project for '22. What it really means is that every company needs to tailor and go to the drawing board and figure out what are the real needs by employees for the respective asset, for the respective region. So this is now a multiyear effort for every portfolio company. But our signal is clearly that we welcome and require that employees are explicitly addressed as a stakeholder. So the 2 examples that we share in our CSR report is a German asset called Schleich, where we have really established an employee incentive program, which gives every employee the opportunity to invest in the company and to benefit from the value creation and financial upside. So that's an example of a Stakeholder Benefits Program that financially benefits our employees. The second example that we share is an American asset called EyeCare Partners, where we have really established a benefits package, a plan that focuses on health insurance, for example. At the same time, this company has implemented or is institutionalizing a career institute that offers training and staff support for their employees and really helps with the further education for these employees. So as I said, we're beyond the pilot program. It's a multiyear effort. It has found its space in the sustainability strategy, and I'm really excited that we do put employees as a key stakeholder into the strategy. And of course, we're going to provide updates going forward where we stand, what the achievements look like and where we come across like obstacles.

The next question we have from the webcast is for Carmela. Could you please elaborate on the employee turnover in our portfolio companies on your ESG Dashboard? Compared to last year, has it stabilized? And is it not coming down?

Yes, sure. It's a good question. I would start by thinking that there are a couple of considerations to be made on that. Turnover is really industry-specific, so the high levels must be assessed against the same industry. Companies, for instance, in the retail and the food sectors, for instance, will have higher turnover than industrial companies, but that's just the nature of the business now. Another thing to take into consideration here is that this is the second year the dashboard includes the impact of COVID as the survey data is from July 2020 to June 2021. And for that reason, the turnover metrics still have the impact of the pandemic, and we are still seeing a lot of movement after the first year of uncertainty in the job market, right? So actually, even if we work hard with our portfolio companies, an employee -- having an employee engagement program is a core area of our ESG engagement. We expect turnover levels to remain high for the next duration of the dashboard. But hopefully, we will continue improving over time, not only because of our work, but also because of the evolution of the market.

Thank you. And we have another question for Carmela. Would you define your approach as impact investing?

Well, actually, no. We do not define it as impact investing. We integrate ESG throughout our platform, and this is something that can be done for any type of company independently of what they do as it relates to their operations and how they do business. Our partnership, we define impact investments as companies that make a positive contribution to society or the environment through their business model, so focusing on the product or service, basically the what they do. So for us, ESG is something that is about building more sustainable businesses. It's something that any responsible investor can and should do. And so for us, it's not impact investing. But you can find more information on this in our ESG versus impact article, which is included in the report.

Thank you. The next question we have on the webcast is for André. Have the ESG targets of your strategy being reflected in senior management bonus and remuneration arrangements?

Well, actually, they will be reflected. That can be found in the compensation report, so the Nomination and Compensation Committee is going to be responsible for that. But the plan is that the executive team's compensation will be linked also to sustainability-related progress and targets. So the executive team's long-term incentives are linked or are determined both with the quantitative and qualitative element. What we want to do is we want to qualitatively assess the progress made by the executive team on sustainability-related targets and project areas. I say qualitative assessment because I do believe that judgment needs to supersede formula. So what I would like to see from the executive team, but it's up to the Board to compensate the executive team, is that they really initiate and drive tangible long-term projects, such as the ones that are laid out in sustainability strategy. And hopefully, there's progress. And I prefer this dedication in projects and progress over specifying a small set of short-term KPIs that can be more easily achieved, and that is how we intend to link the executive team's compensation to sustainability. Now maybe going one step beyond, what I find important as Chairman of Sustainability is that sustainability is on the goal setting of not just like the executive team but of investment leaders, investment professionals and beyond investment teams because the sustainability strategy will depend on many, many leaders and most employees really contributing. And that's why sustainability will be a goal that should make it into the assessment over the years to come.

Thank you, André. The next question we have is for Kirsta from the webcast. Why is the progression to 25 women in senior leadership slow? What are the challenges? And how is PG tackling them?

Sure. So -- well, I think there's 2 reasons or there's 2 paths to achieving the goal. One is internal progression, and that was our first bias to achieve the goal through progressing female talent internally. The challenge there is simply the long-term nature of that. So our emphasis as a firm has always been on hiring talent at the beginning of their careers and training them on our methods and ways of working, and it takes 10 to 15 years to get to that MD level. And therefore, we've got a long-term project there. To make sure that we do continue to progress from that perspective, we did 2 years ago start measuring progression rates, as I mentioned before. On that end, we also set goals for our graduate program, our financial analyst program to ensure that 40% to 60% of our employees coming in through that route are coming from underrepresented and also female groups. We are also, as I mentioned before, investing more in targeted development for female employees to ensure that they are maximizing their potential in Partners Group. So that's the progression side. On the hiring side, the senior hiring, we did determine 2 years ago that we would not only achieve the goal through internal progression, that we would also need external hires. The challenge is there. There is a reality, which is that female talent is in high demand in this industry at the moment. So there's a pay challenge where they can often demand more pay than others, and equal pay for us doesn't mean equal pay. So we won't go outside of our pay bounds. So that's one challenge, but I think that's an overcomeable challenge. I think the other challenge is that the fast growth of our firm has meant that we have often veered towards candidates who are willing to move now, and I think female talent can sometimes be more cautious about moving firm. And so what we're doing there is starting to invest more in developing a longer-term relationship with some -- both female and male talent to ensure that we really are getting the best people into the firm, not just the people who are available now. So those are some of the things that we're doing to overcome those challenges.

Thank you, Kirsta. And final question from the webcast for Carmela. What KPIs do you report to investors? And how do you report the achievement of your environmental goals?

Good question also. Look, we have our ESG KPI Dashboards and this covers our direct lead and joint lead portfolio. And this is included in our public CSR report, right, the one that we're publishing today. Now when we created this dashboard years ago, there was no common framework on ESG reporting back in the day, at least for all these different types of assets. And in the end, we are firm believers in sharing best practice and not reinventing the wheel. So as we continuously improve our reporting and also expand to other asset classes and any asset classes and investment strategies, we're looking into the new frameworks that have emerged in the industry. And for that, on the KPI and measurement side, we're currently working in reconciling our ESG reporting framework, so our dashboards, with the use of KPIs, so the principle adverse indicators that the SFDR regulation has established. We actually welcome the -- finance action plan because it actually has a framework that will be used by hopefully all managers. And of course, we will continue using FASB as our materiality approach, but we will use SFDR as our ultimate guidance. And we are putting a lot of effort in being able to report for all asset classes in that sense. For the second part of the question, on the environmental side, under presented the sustainability strategy and the reporting on environmental topics and on emissions, in particular, is actually one of the core pillars. When we have made the acquisitions, most of our companies are not really tracking their emissions. So that's why we're putting them on a path to first measure then get assurance on these measurements and then have a plan to reduce. And so this will be reflected in our communication efforts as we report on the footprint of our portfolios.

Thank you, Carmela. We have no further questions on the webcast.

Which I assume means that this corporate sustainability update has come to an end. I would like to say thank you, everyone, for your questions, for your time. I wish you a lovely day, and I look forward, together with Carmela and Kirsta and the team at Partners Group, to update you on sustainability in 1 year at the latest. Okay. All the best. Speak soon. Thank you.