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Palatine Private Equity LLP

PRI reporting framework 2018

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Pre-investment (selection)

PE 05. Incorporating ESG issues when selecting investments

05.1. During due-diligence indicate if your organisation typically incorporates ESG issues when selecting private equity investments.

05.2. Describe your organisation's approach to incorporating ESG issues in private equity investment selection.

As an overarching measure we have ensured that all our staff, and in particular the Investment team, are aware of the many facets of material ESG matters that may arise in a business investment context. To support this we have carried out in-house training and have supplied regular updates on ESG matters alongside our comprehensive Responsible Investment Manual.

We have identified the key points in our investment selection where ESG investigations and reports should be in place to be effective and efficient. Action to be taken is set out as guidance in our detailed staff RI Manual and summarised in a deal flow diagram.

The investment selection process is supported by a series of 3 bespoke tools which allow us to drill down from a high level to focus on more detailed screening and due diligence in the most material areas of ESG for any particular sector and company, including an at-a-glance ESG scorecard. This manageable process provides an auditable trail of the basis of our decision making.

05.3. Additional information. [Optional]

PE 06. Types of ESG information considered in investment selection

06.1. Indicate what type of ESG information your organisation typically considers during your private equity investment selection process.

06.2. Describe how this information is reported to, considered and documented by the Investment Committee or similar.

Pre-deal we use 3 tools in our ESG analysis and reporting.

Tool 1, is a pointer to sources of ESG news and information  to help identify ESG matters in a sector.

Tool 2 is used to look at the business sector that a target company is in and the likely materiality matters that may have to be assessed prior to a deal.

Tool 3 is then used to look at the specific matters relating to the target company and to create a profile of what is relevant. It operates two levels, highlighting significant material matters such as e.g. carbon intensity, human rights violation risks, regulatory and compliance related risks, etc, but also digging deeper to fill out the picture for each material matter, as well as matters of general concern for any company, such as good Governance. We not only seek to identify ESG risks but also opportunities that might help to create value if the deal goes ahead.  The output of Tool 3 is an ESG scorecard accompanied by commentary to note significant findings.

All investment papers have a detail section on ESG reporting the findings of the tools and tool 3 will be reviewed by the IC.

PE 07. Encouraging improvements in investees (Private)

PE 08. ESG issues impact in selection process (Private)