This is the first in, what I expect to be, a series of articles discussing strategies and methods for ESG-guided impact investments in the infrastructure sector, including transportation and utilities. ESG, which stands for environmental, social, and governance, is a civic-minded approach to investing that tracks and promotes how companies score relative to these responsibility metrics. As a Managing Director at EQT Partners, I have led and been involved in the sourcing, development, and implementation of impact investments with the goal of contributing to the efficiency, safety, sustainability, and accessibility of key infrastructures and related services in the United States.
The furtherance of socially responsible investments is a central commitment of the EQT organization, as evidenced by the company’s Handprint 2030 – a manifesto to drive social change and innovation through responsible investment practices and the most ambitious set of commitments made by an investment company to accelerate positive impact. In this article, I will present a specific case of the Handprint 2030 at work – specifically, EQT’s acquisition of First Student, the largest student transportation services company in the United States, in July 2021 and its subsequent transition into an ESG-guided business model.
As part of the due diligence process leading up to the acquisition, EQT and its external advisors conducted a thorough study of First Student’s business, the market, emerging trends, and technology to develop a comprehensive strategy to restructure the company to an ESG model. Following the acquisition, we implemented an ESG governance program to ensure that sustainability and social responsibility remain primary board and management priorities. Through the ESG committee, on which I served, we strategized and implemented a number of sustainable and socially responsible initiatives, such as renewable fleet sourcing strategies, carbon offset strategies, community engagement programs, and ethnic diversity programs. Additionally, in collaboration with third-party consultants, First Student worked to assess its impact on greenhouse gas emissions, build its tracking and reporting capabilities, and prepare annual sustainability reports.
Our top priorities included the implementation of a robust fleet electrification strategy. Working with a management consulting firm, we identified and assessed the key drivers affecting the adoption of electric battery school buses, including regulatory tailwinds, supply chain considerations, battery cell availability, manufacturing capabilities, and the charging infrastructure in the United States. After confirming the feasibility of a wide-scale electrification program during the diligence stage, we worked to further refine and execute the strategy based on a number of key components. This included participation in the U.S. Environmental Protection Agency’s Clean School Bus Program. With funding from the Bipartisan Infrastructure Law, the EPA Clean School Bus Program provides $5 billion over five years (FY 2022 – 2026) to replace existing school buses with zero-emission and clean school buses. Through this program, First Student was able to secure $490 million in funding for 1,200 electric school buses. The company now has 362 active electric buses with another 1,600 on order or in planning. Additionally, our ESG initiatives included an ambitious decarbonization strategy, which involves prioritizing regions for deployment of electric vehicles, developing charging infrastructure assets, cooperating with utility companies for electricity procurement, and accessing other Federal and State grants.
As part of our commitment to community values and social impact, the ESG-guided transition also involved a substantial investment in key IT initiatives, including the development and deployment of innovative products and services to enhance safety and operational efficiency. Working with First Student’s new Chief Information Officer, we introduced new technologies, advanced analytics, and real-time communication with drivers, parents, and districts, to provide unmatched care and safety for students. Additionally, the company was able to successfully develop a custom technology, called FirstAlt, which is a groundbreaking alternative transportation service for students with special transportation needs, including those with behavioral challenges, students requiring special needs equipment, homeless students, and out of district students. In addition, in order to extend First Student’s capabilities in the special needs area, we identified and led the acquisition process to purchase other companies that provide these services in specific regions, including Total Transport (New York Tri-State area) and Apple Bus (Midwest region).
Another important achievement was the rollout of DriverHub tablets deployed across the fleet to improve safety, dispatching, routing, scheduling, and other logistical matters. With ESG committee oversight, EQT invested $80 million of capital and operating expenses in technologies, including DriverHub, real-time GPS tracking, and investments in the contract database and back-office technologies. Similarly, we oversaw the continued rollout of FirstView, First Student’s real-time parent / district bus tracking application. As a result of these efforts, usage of technology increased to more than 25% of all districts serviced by the company, thereby making a significant contribution to the safety and efficiency of First Student’s operations.
At First Student, EQT has successfully developed and led the implementation of major changes, along ESG guidelines, that have significantly enhanced the reliability and safety of its student transportation services, while reducing carbon emissions and creating greater value for the communities in which the company operates. As the First Student case demonstrates, the financial community can play a vital role in the development of civic-minded business practices that enhance communities and preserve valued resources, while maintaining profitability.
Neha Jatar is a managing director in EQT’s Infrastructure fund, having joined EQT in 2018. Neha co-leads the transportation and logistics sector and has led investments in Osmose Utilities Services, a leading provider of asset health services for utilities and telecoms in North America, First Student, the largest provider of student transportation to school districts across North America, and most recently, Scale Microgrids, a developer, owner, and operator of microgrids and advanced distributed energy resources in the US.
