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Universities Superannuation Scheme - USS

PRI reporting framework 2018

Export Public Responses

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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.

Please see our response under PE01.

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.

          The Scheme may appoint specialist consultants to review ESG matters relating to a deal.

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

The EDD process feeds into the investment decision making process.  The process seeks to identify what ESG risks exist, how they are being mitigated, and then rank whether the residual risk remains high, medium or low.  The risks and mitigating factors are presented at a deal close out meeting and highlighted in the Private Markets Investment Committee (PMIC) Investment Memo, upon which the final investment decision is taken.

Re PE6.1

The nature of direct and co-investments, means it is unlikely we would seek or have available data from all the above sources for every deal and the scheme takes a risk based approach appropriate to the deal's timings, origination, expertise and knowledge.

For deals where USS is taking a direct investment, the scheme will appoint specialist external advisors, and consultants to assess ESG issues if these are deemed material for the asset under investigation. Where there are physical assets included in the deal, this typically includes specialist environmental consultants.

PE 07. Encouraging improvements in investees

07.1. During deal structuring,what is the process for integrating ESG-related considerations into the deal documentation and/or the post-investment action plan?.

          Views on ESG performance and priority actions will feed into asset management plans conveyed to the company through USS's governance at the asset.

07.2. Describe the nature of these improvements and provide examples (if any) from the reporting year

Where we have influence, particularly where we have a board position, and where ESG due diligence or RI reviews highlight shortfalls in ESG management practices, USS will encourage improvements. We may seek to work with fellow investors and/ or management through our roles on the board of investee assets.

During the course of the year, the scheme developed a more systematic ESG performance review process for the largest directly-held assets in the private markets portfolio. This is outlined in PE01. The process will complement ESG-dedicated face to face meetings, and help USS to benchmark performance and prioritise ESG improvements at investee assets.

Where we are investing alongside a GP for a co-investment, we seek to establish the GP's views on ESG risks and performance management pre investment as part of our due diligence processes, and to understand how oversight will be delivered. We may seek assurances regarding the lead investor's plans to manage material ESG risks post investment.

07.3. Additional information.

PE 08. ESG issues impact in selection process

08.1. Indicate how ESG issues impacted your private equity investment selection processes during the reporting year.

08.2. ESG issues were included in the post-investment action plan /100 day plan

08.3. Additional information.