The term “ESG” has become ubiquitous in investment circles over the past decade. But what happens when an investment firm believes it was practicing responsible investing before the terminology existed?
Waud Capital Partners released its first annual Responsible Investing report in November 2024, offering a window into how the Chicago-based firm approaches environmental, social, and governance factors. The report covers a firm with over 30 years of history and approximately $4.6 billion in assets under management.
Private Equity Before ESG Became Standard
“While today marks the publication of our first Responsible Investing report, our journey of responsible investing began long before the adoption of that term,” said Reeve B. Waud, Managing Partner of Waud Capital.
This statement reflects a tension many established firms face: how to document practices that predate current reporting frameworks. Reeve B. Waud added, “Responsible investing is not a niche activity but a core tenet of who we are and what we care about; it is also intelligent investing.”
The firm’s approach distinguishes between values-driven decision-making and the formalization of those decisions into measurable frameworks. Founded in 1993, Waud Capital Partners operated for nearly three decades before publishing structured ESG metrics.
November 2024: First Annual Responsible Investing Report
The report released in November 2024 represents Waud Capital’s first public accounting of how it addresses environmental, social, and governance factors. Rather than a recent pivot, the documentation captures existing processes.
Since 2022, Waud Capital has engaged third-party firms to conduct ESG surveys across its portfolio companies. These surveys gather baseline data on current practices and identify areas for improvement.
The firm also began calculating Scope 1 and 2 carbon emissions for portfolio companies through external consultants. Scope 1 covers direct emissions from owned or controlled sources, while Scope 2 includes indirect emissions from purchased electricity, steam, heating, and cooling.
Material Factors Across Investment Lifecycle
The documentation describes how Waud Capital considers ESG factors throughout its investment process—from initial screening through ongoing portfolio oversight. Material factors vary by sector—what matters for a software company differs from a healthcare provider.
For healthcare investments, factors might include patient safety protocols, employee training requirements, and regulatory compliance systems. Software companies face different considerations: data privacy, cybersecurity infrastructure, and employee retention in competitive talent markets.
Reeve B. Waud’s comment about “intelligent investing” suggests the firm views ESG integration as risk management rather than values signaling. Identifying governance gaps before acquisition, for instance, can prevent costly regulatory issues post-close.
The firm specializes in healthcare and software/technology sectors, with typical equity investments between $75 million and $200 million (https://www.waudcapital.com/en/approach/). This middle-market focus means portfolio companies often lack sophisticated ESG reporting when acquired. Waud Capital’s role includes building these capabilities.Since 1993, the firm has completed more than 460 investments, including platform companies and add-on acquisitions. The 2024 report suggests these investments were informed by ESG considerations even before formal frameworks existed.
