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Stafford Capital Partners

PRI reporting framework 2018

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.3a CC. Describe how your products or investment strategy might be affected by the transition to a lower-carbon economy.

We have these products that are affected by a transition to a lower carbon economy:

Sustainable Capital - we expect our Sustainable Capital products to benefit positively by a transition to a lower-carbon economy. Sustainable Capital incorporates ESG factors acutely into its investment decisions to better mitigate risk and generate sustainable, long-term returns. The guiding force behind this approach is to adapt sustainable development goals, such as the 17 Sustainable Development Goals (“SDG”) outlined by the United Nations in 2015. Many of the current Stafford sustainable/venture portfolio investments already align well with the UN’s development goals. Such investments include exposure to companies within the energy efficiency financing, LED manufacturing, water desalinization, and solar energy markets, among others. Anticipated market evolution continues to present promising opportunities in the sustainable space. Improvements to technologies, increasing attractiveness of sustainable economics, transformations within the energy industry, and a focus on efficiency and cost savings for industrial and commercial customers should provide additional support for companies with positive sustainable attributes. 

A transition to a lower-carbon economy can put new pressures on businesses. One is example is we have exposure to toll ways and roads in some of our infrastructure investments. As there is a shift to lower-carbon solutions, they might include increase ride sharing / public transport, which could result in less use of the toll way. We are conscious of negative effects of this transition, and include an analysis of this in our due diligence on an investment.

Infrastructure - we expect our Infrastructure to benefit positively from a transition to a lower-carbon economy. These products already have a material preference for investments aligned to resource efficiency and energy efficiency, consistent with the SDGs, consequentially benefitting in the same way as Sustainable Capital. 

Timber - we expect Timber investment would be positively affected by a transition to a lower carbon economy based on it being a net carbon sink and the likelihood that any transition would entail carbon emissions pricing and policy settings that would incentivise the maintenance and investment in expanding forest assets in key international regions.
 

01.3b CC. Describe how climate-related risks and opportunities are factored into your investment strategies or products.

We have these products that are affected by a transition to a lower carbon economy:

Sustainable Capital - The Stafford Private Equity team incorporates ESG factors into its investment decisions to better mitigate risk and generate sustainable, long-term returns. The guiding force behind this approach is to adapt sustainable development goals, such as the 17 Sustainable Development Goals (“SDG”) outlined by the United Nations in 2015. The S3 Investment Team will use the UN’s SDGs not only as a guiding force, but also as a screening mechanism for potential investments in the Fund. Stafford believes this approach, along with its focus on ESG factors, can be a catalyst for not only helping drive positive change in the world, but also for strong investment performance moving forward.

Infrastructure - Infrastructure also incorporates ESG factors into its investment decisions to mitigate risk and generate sustainable long-erm returns. It adapts various benchmarks, exclusions required by investors and guidance, including the World Bank's method for accounting for ESG considerations and to some exent guidance from the approach taken by our Sustainable Capital service line. 

Timber - investments are exposed to biological risk as a result of climate change.  Stafford seeks to manage this risk by maintaining a diversified exposure to geographies and species.  We also continue to monitor research into the effects of climate change on our investments and work with our managers to make adjustments to management when needed.

Products specifically addressing opportunities arising from other sustainable development goals.

01.4. Describe your organisation’s investment principles and overall investment strategy, and how they consider ESG factors and real economy impact.

As we set out in our Responsible Investment Policy, Stafford’s management and staff are convinced that ESG factors impact the environment in which we invest and thus our core business. As a result, it is of paramount importance that we explicitly recognize and evaluate the ESG-related risks and opportunities and manage these in a prudent and methodical manner.

We pay particular attention to how our investment process can positively contribute to promoting greater ESG outcomes by reducing agency risk through our rigorous process of oversight, seeking control and greater access to underlying investee entities, both in terms of our due diligence process and how we manage and monitor our investments over time.

As a PRI signatory, we are guided by the 6 principles in all of our business lines accordingly, with a particular focus on implementing PRI #1, i.e., the integration of ESG-considerations into the investment process. Engagement is at the heart of embedding Stafford’s ESG beliefs into our investment processes, both internally across business lines and staff members, and also externally as a fund-of-fund manager with the underlying GPs and our institutional clients. 

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]


Stafford’s overall investment philosophy can be summarized as follows:
• Make good investments
• Be good to deal with and act with integrity
• Be innovative in creating value
• Profit from knowing what is really going on

As we set out in our Responsible Investment Policy, Stafford’s management and staff are convinced that ESG factors impact the environment in which we invest and thus our core business. As a result, it is of paramount importance that we explicitly recognize and evaluate the ESG-related risks and opportunities and manage these in a prudent and methodical manner.

We recognize our responsibility as an investor to contribute to a more sustainable financial system by taking a long-term, responsible approach across the private market funds and assets in which we invest. We pay particular attention to how our investment process can positively contribute to promoting greater ESG outcomes by reducing agency risk through our rigorous process of oversight, seeking control and greater access to underlying investee entities, both in terms of our due diligence process and how we manage and monitor our investments over time.

We are stewards of money entrusted to us by our institutional clients, who in turn manage money on behalf of their investors. As active investors, we play an important role in ensuring that our investments uphold commonly accepted standards of environmental protection, human rights, and good governance in a way that will enhance and underpin the financial returns that our investors expect of us over the long-term. In this context, Stafford has been an early signatory to the PRI, which plays a central role in our ongoing efforts to integrate ESG across our investment process.

Finally, Stafford believes that successful and responsible investments with comprehensive consideration of ESG-related risks and opportunities ultimately depends on the knowledge, convictions, and beliefs of the people running the investment process, and therefore is committed to corresponding recruitment, talent development, organizational learning, and training.
In implementing our beliefs, as a PRI signatory, Stafford is guided by the 6 principles in all of our business lines accordingly, with a particular focus on implementing PRI #1, i.e., the integration of ESG-considerations into the investment process.

Engagement is at the heart of embedding Stafford’s ESG beliefs into our investment processes, both internally across business lines and staff members, and also externally as a fund-of-fund manager with the underlying GPs and of course, with our clients and pension fund investors. We recognise that we play an important role in improving the ESG standards that apply across the investee entities and GPs who we invest with, as such we regularly ask them questions about ESG (both formally through a bi-annual survey and informally through face-to-face meetings and correspondence), testing their approaches and continually looking for ways to improve outcomes is of tantamount importance to us for both pre-investment and post-investment monitoring and oversight. 

We note that not all of the underlying investment managers are at the same place in terms of acceptance and integration of ESG issues into core processes, but we prefer to work with these managers/GPs and to engage with them to improve standards rather than divest or narrow the opportunity set to only ESG leaders. It is our view that this will not only produce better risk-adjusted returns for our investors over the long term, it will also help to raise standards across the real economy more broadly.  

Stafford is focussed on secondary fund acquisition transactions (“secondaries”) which provide the benefits of limited/no blind pool risk when making investments. Therefore, we usually have a rather good information base when making investment decisions which also allows to assess ESG factors in addition to real economy impact before committing to an investment.

For example, in Stafford Infrastructure’s strategy is to acquire interests in core infrastructure funds from existing investors via the secondary fund market. One of the private funds in this strategy may also invest up to 20% in late-stage primary funds and/or directly alongside quality managers as co-investments. With this strategy Stafford Infrastructure targets 8-9% net return with a 5% cash yield component, diversification by geography (60% Europe, 20% North America, 20% RoW), asset type, investment manager, and (past) vintage years, and overall 8-12 investments in target infrastructure funds.

ESG factors are also considered via exclusion criteria which have to be tested for materiality (e.g. nuclear power, prisons, military) and as integral part of our investment process according to Stafford’s RI Policy that has been mentioned before.
 


SG 02. Publicly available RI policy or guidance documents

New selection options have been added to this indicator. Please review your prefilled responses carefully.

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

          Products specifically addressing opportunities arising from other sustainable development goals.
        

URL/Attachment

02.3. Indicate if your organisation’s investment principles, and overall investment strategy is publicly available

02.4. Additional information [Optional].

The ESG Committee completed a review of the framework and terms of reference for responsible investing that reflect the current position and intent of the organisation.

A copy was released onto the website.

 


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

The organisation has adopted a code of ethics and responsible investment framework that promotes:

- Internationally accepted ethical values;

- Respect and the protection of the legitimate interests of our clients and stakeholders; 

- Avoiding the misuse of non-public information; and

- Acting with integrity and avoiding behaviour that is either perceived to be or is, actually fraudulent, deceptive, manipulative, or in violation of any applicable law, rule or regulation of a governmental agency.

Investment decisions:

  1. Investment Committee must demonstrate the appropriateness of decision making to prove the absence of preferential treatment.
  2. The Investment Committee is diversely constituted so as to facilitate an objective review and with signoffs of positions broadly canvassed, candidly debated and considered comprehensively. Thus positions ought not to pose any conflicts of interest and are entered into for the benefit of the private fund, the mandate, clients and its investors fairly and equitably. Investment managers proffering options in an investment recommendation or review paper, which endeavours to table independent diligence (experts, such as on legal, tax).
  3. An independent Operational Governance Review of investments, performed by the key senior personnel from the Operations, Compliance and ESG service lines.
  4. A disclosed agreed upon approach to fund commitment allocations. 

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios (Private)


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