Investors want increased ESG focus from small and micro caps

Professional investors in the UK are expecting a greater focus on ESG [Environmental, Social and Governance] issues in small and micro-cap companies, new research from investment holding company MBH Corporation shows.

The MBH study, among UK based professional investors managing a collective GBP83.2 billion who specialise in small and micro-cap investments, found 87 per cent believe the focus on ESG issues will increase over the next 12 months with 31 per cent expecting a dramatic increase in the next year.

The numbers expecting a dramatic increase over the next five years increases to 46 per cent, the study found, with none of the investors interviewed believing the focus on ESG will decrease in the next 12 months or the next five years.

MBH Corporation plc, a diversified investment holding company listed in the US and Germany, which acquires successful, well established micro-cap and small sized enterprises across multiple geographies and sectors, says its role in helping small businesses to grow and create jobs in their communities is central to its ESG strategy.

ESG criteria are a set of standards for a company’s operations used by socially-conscious investors to screen potential investments focusing on environmental issues, social issues such as relationships with employees, suppliers and local communities and governance issues relating to a company’s leadership.

The research found 82 per cent of investors believe the focus and investment by small and micro caps in ESG will increase over the next three years with 37 per cent saying it will increase dramatically.

Increased focus and investment on ESG will be accompanied by enhanced reporting and transparency from companies on their ESG policies and strategies with 92 per cent expecting the level to increase including 49 per cent who expect a dramatic increase.

MBH Corporation’s public support for the UN’s Sustainable Development Goals has been recognised by ‘Support the Goals’, an initiative to rate and recognise those businesses that support the UN Global Goals, with a five-star rating.

Stars are awarded when businesses publicly demonstrate plans, commitments, actions, and progress towards the Sustainable Development Goals (SDGs) agreed by world leaders in 2015 as a plan to end poverty, extreme inequality, and climate change by 2030.

Vikki Sylvester, CEO Acacia Training and Executive Director of MBH says: “ESG issues sit right at the heart of the corporate and investor agenda and our study demonstrates they will only grow in importance for investors and small and micro-cap companies.

“ESG is not just something for major companies and our commitment to ESG is integral to our business as we continually look to find new ways to make sure we continue to have a positive impact on our people and the planet.”

Callum Laing, CEO MBH Corporation, says: "ESG might be flavour of the day for investors right now, but whether it is called ESG, CSR, or Social Entrepreneurship, most small businesses - certainly the ones we work with - have been doing this in one form or another for decades.  Our clients and most definitely our team members needed to know that their companies stood for something more than just selling widgets.  We welcome the focus from investors and the opportunity to use third-party benchmarking to create a common language around the ethos that is already deeply ingrained in many great companies.”

MBH currently has 26 successful and profitable small businesses in its portfolio and will continue its highly focused growth of well-established profitable small businesses across multiple geographies and industries.

MBH targets companies carrying little to no debt, delivering around USD1 million to USD10 million EBITDA and are generally still run by their founders who become co-owners of MBH.

By leveraging its unique Agglomeration strategy, MBH can create substantial shareholder value through the consistent and accretive acquisition of excellent companies. With Agglomeration, profitable companies convert their private shares into public shares or bonds in MBH Corporation plc in a perpetual earn-in model. Company owners are then incentivised to accelerate their growth trajectory using the resources of the plc including expertise, skill transfer of best-in-class practices, cross-selling to other Group companies and where appropriate, zero cost funding for new growth projects.

Each Group company retains its autonomy and follows appropriate corporate and financial governance. Business owners are also incentivised financially to enhance shareholder value through a share bonus scheme aligning their interests with public shareholders.