Long Term Value Creation Through Environmental and Social Responsibility


Long Term Value Creation Through Environmental and Social Responsibility


For Adenia Partners, environmental, social and governance (ESG) responsibility is not an afterthought – it is a fundamental part of the firm’s value proposition. Over the past 12 years, ESG management has been built into Adenia’s operating and reporting processes. It is one of the first aspects that the firm looks to improve in its investee companies, because Adenia believes that good ESG management is essential to value creation, alongside financial and operational performance.

Founded in 2002, Adenia Partners is focused on investments in West Africa and the Indian Ocean region, with the goal of contributing to sustainable economic growth in these regions. CDC has committed EUR 23m to Adenia funds. The firm takes controlling or influential stakes in small and medium enterprises in several sectors, including financial services, manufacturing, infrastructure and utilities, agribusiness and tourism and hospitality. While the countries in which Adenia invests can be challenging, they are also the ones in which the benefits of good ESG practices can have the most impact.

At Adenia, ESG management is not static. The firm’s environmental and social management system (ESMS) has evolved over the years, notably as a result of suggestions from CDC and other development finance institutions (DFI).

Mariam Djibo, Investment Manager and Senior ESG Officer said:

“One of our primary goals is to demonstrate that effective ESG management systems require short-term investments, but yield meaningful long-term results.”


In 2012, Adenia acquired 94% of Socolait, a leading dairy product manufacturer in Madagascar. The company showed the potential for value creation through a new business strategy that focused on the optimisation of its product range and expansion of its distribution network, amongst other factors.

While the investment was categorized as medium-low on the ESG risk spectrum, since its operations had limited negative ESG impacts, Adenia identified areas for value creation related to environmental and social factors. One of its first initiatives as part of the action plan was to implement a formal environmental, health and safety (EHS) management system. This included the implementation of HR and EHS policies and procedures, tracking of key HR indicators and health & safety training. These types of initiatives lead to improved productivity, lower turnover and better control over the safety of the food produced.

  • Resource efficiency

Socolait’s business is energy and resource intensive. Adenia brought in a resource efficiency expert who identified ways in which Socolait could maximise financial returns, while minimising its environmental impact.

  • Cost savings

Through measures including a boiler replacement, reduction of water leaks, a switch to energy saving bulbs and improved cleaning methods, it is estimated that Socolait could yield savings of approximately US$281,000 annually. The one-time cost to implement these measures was US$544,000, which means it could recover its costs in less than two years and see a potential 55% return on investment within three years.

  • Revenue generation

Socolait began collecting whey, which represented 60-70% of the waste it produced and sold it to local pig farmers. This resulted in a new source of revenue, while also reducing costs associated with waste management.

Example: the milk road project

When Adenia acquired Socolait, the company was importing milk powder to produce most of its dairy products, exposing it to exchange rate fluctuation risks, strong international competition and price volatility. Adenia suggested using fresh milk, but the impediments to this approach included concerns around food safety and volatility in fresh milk supplies.

Socolait decided to launch a programme providing assistance and training to milk collectors and farmers to help increase yields and hygiene. An added advantage is that prices for the milk are fixed for the year in Madagascar. The Milk Road Project has improved the quantity, quality and traceability of the fresh milk Socolait uses in its products, while providing approximately 1,000 small-scale farmers with a stable source of revenue. Socolait collected 2.3 million litres of fresh milk from small-scale farmers in 2013. As a result, Socolait has played an important role in helping to professionalise the industry in Madagascar.

Importantly for Socolait, the programme has resulted in higher margins on its products, more control over its supply chain and decreased exposure to price fluctuations. While training farmers to help increase their yields has not always been easy, the financial benefits of implementing the programme have outweighed the costs.


Value driver

Potential impact

Enhancing value of portfolio companies

– New business opportunities
– Increased margins, through cost savings and revenue growth
– Decreased operational and financial risk
– Higher exit valuations

Access to capital

– Differentiates firm, as ESG considerations become increasingly important to LPs
– Critical for ongoing relationships with DFIs and other impact investors

Strengthening brand and reputation

– Helps to attract and retain employees
– Reduced reputational risk
– Assists with deal flow and differentiates firm from competitors


“Our biggest achievement to date is that ESG has not only been integrated into our investment process, but also in our thinking,” said Mariam. “The next step is for it to become just as natural to our investee companies.

”The near-term goal for Adenia is to improve the ESG data and quantitative metrics it collects, in order to improve the case for ESG initiatives as well as its communications with LPs and portfolio companies. Adenia would like to act as a role model for its portfolio companies and other firms, in the hope that it will raise the bar for ESG responsibility in the markets in which it operates.

In the long term, Adenia hopes that its portfolio companies will provide the most compelling case for the value of environmental and social management systems.

“Companies with proven results that have integrated ESG effectively to increase long-term profits will be best placed to tell the story to other entrepreneurs. Their success, and the role of effective ESG in this success, will speak for itself,” said Mariam.

Editor’s Note: This blog was previously published on CDC and is reproduced with permission.

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