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“The CEO role has become broader and less private”: Michael Ryan, CEO, Dalmore Capital

“The CEO role has become broader and less private”

Michael Ryan
CEO of Dalmore Capital

CEOs should be a driving force for greater transparency within their businesses and must expect to be challenged and held accountable by the public, especially on their environmental, social and governance (ESG) credentials.

Michael Ryan, CEO of Dalmore Capital, says: “The purpose of a business used to be to generate profits for its shareholders, almost full stop. And if you even dared suggest objectives that were not consistent with dividends and profits for shareholders you’d be shouted down.”

“But the world has changed and the social aspect, the focus on health and wellbeing and diversity and inclusion, have all become absolutely central to the way you run a business.”

“The general view now is that CEOs are accountable to the public,” adds Ryan, speaking to PwC UK for the 25th Annual CEO Survey. “The role has become broader and less private than it was.”

Expect to be challenged

Ryan says CEOs who may once have tried to keep their name out of the press and out of the public domain, in order to focus on the ‘day job’, need to embrace the fact their ‘day job’ now involves that broader set of non-financial measures upon which they will be judged.

Ryan sees this first hand with challenges about the environmental impact of investments his company has made in infrastructure projects.

“We need to respond to the global warming crisis. We are right at the centre of that in infrastructure and we have to expect people to challenge us. If we take an example, we have one of the largest waste-to-energy plants in the UK, just outside London,” he says. “I think this is a positive ESG story because waste going into landfill is a disastrous environmental outcome. Absolutely everything from this plant gets used, even the ash gets converted into building materials. Local authority waste gets delivered by barge which eliminates 70,000 to 80,000 truck journeys per year.

“But we’re in a world where we have to expect to be challenged. You have to be able to answer questions about your environmental impact and emissions. Are you using the heat from the plant for community heating? Are you using solar? Will we do carbon capture?”

Investing in the future

Ryan believes proactively addressing such questions won’t just help limit the environmental impact of assets Dalmore is invested in, but will also make them better investments.

“Ten years ago you’d say ‘carbon capture makes no sense, I’m never going to make any money’. Now you’ve got to explore ways to make it work. This is consistent with long-term value creation, because if we sell that plant in 15 years and we’re able to say ‘yes, there’s carbon capture’, ‘yes, we’ve got solar’, ‘yes, we’ve added anaerobic digestion’, ‘yes, we’re using the heat’, and ‘yes, we’re taking the waste by barge’ and we can demonstrate we’ve transformed it to create environmental benefit and reduce its impact on the environment then that business will be worth more money.”

Conversely, he expects life to get tougher for businesses with a less positive story around ESG.

“We’re not in the business of trying to dispose of assets that are in the fossil fuel business. We’re more focused on energy transition and areas such as battery storage and hydrogen,” he says. “But for people trying to dispose of those assets, it is proving very difficult. Generally, there is very little appetite for any asset perceived to have a negative environmental impact.”

However, Ryan says it is not the case investors will accept lower returns just because an asset has a positive ESG story. Rather, as with the waste-to-energy plant, it is imperative to make ESG a compelling driver of long-term value creation and to clearly communicate that value to potential investors. Communication and education are essential.

The importance of openness and transparency

As well as ensuring businesses measure and mitigate their impact on the environment and society, Ryan says organisations must be open with the communities they affect.

He cites the example of the Thames Tideway project - the London ‘super sewer’ - in which Dalmore is the major shareholder.

“London’s sewer system dates back to when the population of London was around a million and it was no longer fit for purpose. Every year, 40 million tonnes of raw sewage was going into the Thames. The Tideway project will take that overflow and deliver it to a Thames Water facility. But you can’t create a 25-mile tunnel in London without causing a lot of disruption. The team at Thames Tideway have been absolutely fantastic at engaging with the local community to clearly communicate what’s happening, what’s the time frame, and how much disruption there will be.”

Ryan sees strong parallels between his firm’s approach to investment and more purposeful business commitments. At the heart of both is a recognition that creating significant long-term value is more important than short-term gains, but they rely upon a clear vision and communication and a preparedness to be held accountable.

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Marco Amitrano

Marco Amitrano

Head of Clients and Markets, PwC United Kingdom

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