Strategy shift: PwC hones in on digital transformation and ESG initiatives to deliver sustainable returns

The firm has made new leadership appointments to help clients derive better value from their PE investments, in the context of unprecedented conditions for the asset class.

London-headquartered financial services firm, PricewaterhouseCoopers (PwC), shared on Thursday (September 22) a strategic update regarding its leadership and investment priorities.

Considered to be one of the ‘Big Four’ accounting firms, the company announced the appointment of Dallas, Texas-based Eric Janson as global leader for Private Equity, Real Assets and Sovereign Funds. He will continue his work as a member of the US based PE leadership team and succeeds Will Jackson-Moore, who has been appointed as the company’s global ESG leader. Both appointments took effect from September 01, the PwC team confirmed with FinanceAsia.

With a tenure boasting over thirty years at the firm – two decades of which have been involved in deal-focussed activity, the announcement detailed that Janson will be responsible for leading PwC’s network of 23,000 deal professionals across 22 territories. He will work with the global team to deliver human-led, tech-powered, data driven solutions that enable PE clients to formulate and implement their ESG strategies effectively, the release added.

Janson spoke to FA about the priorities for his new role. “We have ambitious growth plans across critical areas including technology and transformation, data and digitisation, value creation, ESG and tax… We’ve accelerated our investments in digital, with great progress on data and analytics resources and cloud capabilities, working with our industry-leading alliances. We have also made significant progress to differentiate our ESG network.”

“I will be focussed on bringing together ESG resources across functions and globally, to support clients from strategic and operational consulting, to value creation across deals,” he said.

Janson explained that PwC is pivoting towards digital transformation excellence in order to help clients derive the greatest value from their investments.

“By leveraging integrated systems and alliances that unite different tools such as analytics, data automation, and reporting, we can start to see the evidence of how new digitisation strategies can bring value to our clients and deliver stronger returns.”

Insufficient PE playbook

Janson elaborated on how the firm considers current conditions as marking a transformational period for PE, and as such, how this is impacting and informing the company’s strategic endeavours.

“I cannot recall a period quite like this,” he told FA.

“Even with abundant capital, PE firms are facing challenges due to increasing competition, inflation, market volatility and geopolitical and macroeconomic pressures - the confluence of all of these factors is unprecedented.. We are also seeing increasing financing costs that have not yet fully offset seller’s expectations around valuations.”

“In the face of these challenging market dynamics, the tried-and-true PE playbook is insufficient to increase value for investors, and PE firms risk overpaying for new deals while seeing their current portfolio underperform.”

With deal prices remaining elevated, Janson explained that PE firms are more challenged to create value in their investment portfolios, and in the context of widespread business transformation, firms are looking to overhaul their processes with digital and carbon at front of mind.

“These latest revolutions present both challenges and opportunities to all companies in all industries. But this moment has a particular importance for PE and we believe that those that put digital transformation and ESG at the heart of their strategy will be best placed to maximise value, build trust and deliver sustained outcomes,” he noted.

Private capital potential

He does however Asia Pacific as providing a destination for private investment capital.

“Despite these headwinds, there is opportunity, particularly in Asia. Countries like India with its continued growth in digital penetration, Japan – with a devalued yen and government support to offset historical declines in the manufacturing industry, and Singapore (as well as Southeast Asia more broadly) with one of the fastest growing consumer markets in the world and a relatively young and highly digital savvy population, show that Asia should continue to be a very attractive region for private capital investment.”

While the long-dated contractual nature of real assets can be viewed as offering some protection in an inflationary environment – in particular, if they involve rental provisions that reset according to inflation metrics – Janson noted that this has led to a disproportionate amount of transaction volume in the asset class, especially in the residential and hospitality sectors.

Last year, PwC became embroiled in the problems of China’s property sector as auditor of indebted developer, Evergrande. In August, Hong Kong’s accounting watchdog, the Financial Reporting Council (FRC) launched a second investigation into the developer’s Hong Kong-listed subsidiary, Evergrande Property Services, alongside the accounting firm, citing concerns about the developer’s 2020 accounts ahead of its default in late 2021. Evergrande owes $300 billion in debt liabilities.

Addressing global ESG issues at scale

In the release, Kevin Burrowes, leader for Global Clients & Industries at the firm’s UK base said that ESG is increasingly at the core of the value equation. Indeed, Janson explained that the firm is upskilling its global network to help stakeholders address sustainability and other related challenges.

“Our global footprint gives us the opportunity - and responsibility - to help answer the challenge at scale,” he told FA.

“The focus has to be on net zero transformation of businesses and their supply chains, mobilising sustainable capital, enhancing resilience against climate risks and delivering robust reporting on progress.”

He added that so far, over 100,000 PwC employees have participated in ESG-focussed training.

“We work closely every day with our Asia Pacific colleagues – indeed across all our markets – to address the breadth and complexity of challenges facing our clients.  I am working with our Asia Pacific teams to invest in new capabilities, technology and upskilling our cross-geography client teams.”

He said that he will be visiting the region to connect with clients and teams around a PE event hosted by the firm in Japan.  

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