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Avanza Group
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ESG engagement in public transport – Spain’s largest urban bus operater “ESG engagement is central to Avanza’s strategy of becoming a leading operator in our market sector. Doughty Hanson’s emphasis on sustainable business practices has already produced results and is helping us to generate earnings, cut costs and manage risks in areas which might otherwise have been overlooked“, Jesus Lopez Torralba CEO, Avanza. Doughty Hanson acquired Avanza, Spain’s largest urban bus operation, in February 2007. Doughty Hanson believed that the group presented an attractive opportunity to develop a regional network as the Spanish bus industry continued to consolidate. Its stable cash flows and recession-resistant business model as well as the long-term nature of its concessions meant that Avanza was an attractive leverage buyout candidate. Doughty Hanson prides itself on being a leading practitioner of ESG engagement in private equity. The firm was one of the first private equity groups to sign up to the PRI in June 2007 and was the first to appoint an in-house head of sustainability to coordinate ESG implementation across its portfolio in June 2008. Relevance of ESG issues to the investment Prior to acquisition ESG issues were addressed at due diligence by the Doughty Hanson deal team as well as external consultants. A comprehensive ESG review of the business was performed by Doughty’s in-house head of sustainability shortly after his arrival in June 2008. The review involved discussions with senior investee company management and comprehensive site visits to a representative number of locations. It also considered the views of various key stakeholders including local municipalities, customers and regulators. Throughout the process Doughty Hanson considered a range of ESG issues from the perspective of both risk and opportunity for the business. These included: fuel storage, fuel efficiency, fuel type and use, climate change impacts, water conservation, land impacts, health and safety and service efficiency. How ESG improvements were achieved Doughty Hanson established fuel reduction policies and targets, arranged driver training and piloted a live driver and fuel use (telematics) system. These initiatives are expected to reduce fuel use by 2.5% to 5% over two years and save €0.7m to €1.4m (2,000 to 4,000 t CO2e) a year. Doughty Hanson are also investigating the potential for solar power at suitable locations to help secure concessions and generate additional income (€150k a year). Health and safety initiatives in streamlining systems and the greater efficiencies achieved to date have resulted in savings of €200k a year. Outcomes Investor: Doughty Hanson |
