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About this toolkitAdenia Partners: environmental and social responsibility
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Adenia Partners: environmental and social responsibility

Adenia Partners: long-term value creation

Adenia Partners

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.

For a fund manager, the benefits of proactive ESG management are wide-ranging: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. The firm takes controlling or influential stakes in small and medium enterprises in several sectors, including financial services, manufacturing, infrastructure & utilities, agribusiness and tourism & 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.

ESG Positive Impact:
  • Value creation in portfolio companies through improved margins, new business opportunities and reduced operational risk
  • Enhanced access to capital, particularly in response to increasing LP interest in ESG
  • Stronger alignment with management teams as a result of ESG action plans

For a fund manager, the benefits of proactive ESG management are wide-ranging:

Value driverPotential 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 development finance institutions (DFI) 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

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 DFIs. 

“One of our primary goals is to demonstrate that effective ESG management systems require short-term investments, but yield meaningful long-term results,” said Mariam Djibo, Investment Manager and Senior ESG Officer.

Integrating ESG into the investment process 

ESG is present at every stage of Adenia’s investment process, from initial screening through to exit. In fact, identifying ESG risks early on is not only critical to making an informed investment decision, but is also seen as an opportunity to make improvements. Measures to mitigate these risks, as well as initiatives to add value, can be factored into the investment decision and action plan for a portfolio company.

“Even when a company is well-managed, there is always room for ESG improvements that will lead to value creation,” said Koloina Razafindratsita, Investment Associate and ESMS Officer. For example, introducing the monitoring of key human resource indicators such as absences, staff turnover and wages paid can lead to improvements in employee productivity that directly affect a company’s bottom line. Integrating robust ESG practices in a company also enhances rigour and discipline within investee companies.

Adenia’s ESG value chain has been embedded in its investment process as follows:

  • Initial screening: At the first stage of analysis, Adenia screens the opportunity against exclusion lists [1] and then conducts a risk assessment and categorisation. The categorisation is based on two criteria: the ESG risk level of the company and the quality of the ESG risk management system. One of the key reference tools at this stage of the process is CDC’s Toolkit [2], which supports investors to manage environmental and social issues to international standards and identify ESG opportunities.
  • Due diligence & investment decision: Adenia drafts ESG due diligence reports and conducts impact assessments, based on company information, site visits and staff interviews. Depending on the initial risk categorisation, Adenia may hire external consultants to conduct specialised studies.
  • Investment agreement: An ESG action plan is agreed to by Adenia and the investee company and included in the final investment agreement.
  • Investment monitoring and value creation: Adenia monitors the company’s progress on the action plan by tracking ESG KPIs, and providing ongoing support and training. A company’s progress against the action plan leads to short and long-term value creation opportunities.
  • Exit: To ensure continued good ESG practices, the fund conducts awareness raising for the buyer.

However, process alone is not sufficient. Adenia’s focus on appointing employees with responsibility for ESG within its portfolio companies is echoed within the firm itself. In order to effectively implement and manage the ESG process, the firm has introduced the following structure:

  • Senior Investment Officer and an Investment Officer who review and validate ESG reports, conduct training, and have overall responsibility for Adenia’s ESMS;
  • Compliance Officer; and
  • Investment Committee member who ensures ESG issues are discussed during investment and exit decisions.

Importantly, the responsibility for ESG management in each investment does not fall to the ESG officers, but rather to the Investment Manager who is leading the deal. In this way, the Investment team is fully involved in ESG, which underscores how critical it is to Adenia’s value proposition and culture.


Creating value through ESG management

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.

a) Resource efficiency

Socolait’s business is energy and resource intensive. Adenia brought in a resource efficiency expert who identified ways in which Socolait could maximize financial returns, while minimizing 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.

b) 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 professionalize 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.


Finding alignment

Implementing effective ESG systems and programmes does not come without challenges, particularly for a firm like Adenia that is investing in markets where environmental and social initiatives are not a priority for small- and mid-sized businesses.

Adenia invests alongside entrepreneurs, as a majority shareholder or a management buyout. Usually, the owner or existing management take a minority ownership stake or remain with the firm. As such, ESG management is a part of the conversation early on, and part of what defines Adenia.

“The advantage of our investment strategy is that it allows us to have significant influence,” said Koloina. “However, for ESG initiatives to be successful and add value, there has to be alignment between Adenia and the company’s management team. Agreeing on action plans is a key part of this process, because management needs to develop a sense of ownership for ESG initiatives.”

Implementing ESG is also sometimes a matter of patience. For example, when Adenia invested in Fruid’Iles, a litchi export business in Madagascar, it found that there were no employment contracts in place for seasonal workers, who are at the core of the business. Introducing these types of contracts was difficult from a logistical standpoint (because of high rates of illiteracy) and because of resistance from Fruid’Iles’ competitors in the industry. However, a year later, contracts for seasonal workers have been adopted by most players in the industry.

Bringing employees on board with ESG

In 2014, Adenia acquired a significant stake in DDP Outdoor Ltd, the market leader in outdoor advertising in Ghana. The bulk of DDP’s employees are involved in installing and maintaining signage, often at significant heights.

While the company was classified as medium-low on the ESG risk scale, it did have issues that had to be addressed, including:

  • No formal ESMS
  • Difficulty in enforcing use of safety equipment
  • Absence of regular safety training programs
  • Lack of record keeping related to work accidents [3]

For employees, formal ESG procedures were new and the management team and Adenia needed to demonstrate the importance of the new measures. As a result of the action plan and ESMS that were introduced under Adenia’s guidance, DDP has made progress in mitigating ESG risks, including an updated employee handbook and the implementation of a performance management system in which operational workers are evaluated on their adherence to safety procedures. Importantly, employees have begun to take ownership as well, forming a union in order to manage the changes that will come as a result.

Improving access to capital

Environmental and social responsibility is a matter of growing interest in private equity. A 2012 study conducted by PricewaterhouseCoopers found that 88% of private equity firms surveyed expected investor attention to ESG issues to rise over the next five years [4]. The UNPRI currently has approximately 130 limited partner (LP) signatories, a third of whom were involved in drafting an ESG disclosure framework for private equity [5].

This growing awareness is a benefit to firms such as Adenia that are at the forefront of ESG management, because it differentiates the firm from competitors and adds value to its brand and reputation. “With non-DFI LPs, we also see it as our role to demonstrate the value of good ESG management,” explained Mariam.

Of course, a proactive approach to ESG management also creates synergy with Adenia’s DFI investors, such as CDC. “As Adenia continues to develop its ESG processes, investors like CDC provide us with support and advice that are extremely valuable, because of their expertise in ESG,” said Koloina.

Looking ahead

“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.


[1] CDC’s exclusion list identifies the sectors, businesses or activities in which its capital will not be invested, either directly or indirectly

[2] http://www.cdcgroup.com/How-we-do-it/Responsible-Investing/ESG/Toolkit-for-fund-managers/

[3] For detailed information and guidance for fund managers and investors on how to minimize the risk of fatal/serious accidents and how to help prevent future accidents, please refer to “CDC Good Practice: Preventing Fatalities and Serious Accidents,” which is available at www.cdcgroup.com.

[4] “Responsible investment: Creating value from environmental, social and governance issues,” PwC, 2012.

[5] “Environmental, Social and Corporate Governance (ESG) Disclosure Framework for Private Equity,” UNPRI, 2013.