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3i Group plc

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

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

Investment principles

 

To only invest in businesses which are committed to:

  • a cautious and responsible approach to environmental management of their business operations (and those of their supply chain) by making efficient use of natural resources and mitigating environmental risks and damage;
  • respecting the human rights of their workers and of the people working in their supply chain; (ii) maintaining safe and healthy working conditions for their employees and contractors and the people working in their supply chain; (iii) treating their employees fairly; (iv) upholding the right to freedom of association and collective bargaining; and (v) treating their customers fairly and respecting the health, safety and wellbeing of those  affected by their business activities;
  • upholding high standards of business integrity, avoiding corruption in all its forms and which comply with applicable sanctions and anti-bribery, anti-fraud, anti-tax evasion and anti-money laundering laws and regulations; and
  • a strong corporate governance and risk management culture and to complying in form and substance with established best practice in corporate governance which is appropriate to the relative size and complexity of the relevant business and the markets in which it operates.

 

(See below section SG 01.5 for the overall investment strategy)

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]

Overall investment strategy

 

  • To make unquoted equity investments in businesses and funds in Europe and the Americas.
  • To assess proposed investments individually, requiring approval from the 3i Group Investment Committee.
  • To diversify risk through significant dispersion of investments by geography, economic sector, asset class and size and through the maturity profile of the investment portfolio.

3i's detailed Responsible Investment ("RI") policy sets out:

  • An exclusion list of businesses/activities in which 3i will not invest
  • A referral list of businesses in which 3i may invest subject to additional approval as they are particularly sensitive
  • A set of minimum ESG standards that 3i expects its portfolio companies to meet, or to commit to meeting over a reasonable time period.

3i will implement its RI policy by:

  • Screening all new investment opportunities against its Exclusion and Referral lists.
  • At an appropriate stage in the investment process, carrying out a high level assessment of new investment proposals to identify potential material ESG risks and opportunities.
  • Where potential material ESG risks are identified, evaluating management’s commitment, capacity and track record in addressing ESG issues and whether specialist due diligence is required.
  • Where our due diligence identifies actual material ESG risks, 3i will require the portfolio company to commit to implementing appropriate measures to mitigate those risks.Such measures may include meeting relevant International Standards (over a reasonable time frame) where these are more stringent than Applicable Laws.3i will support the potential portfolio company to do so by developing action plans with appropriate targets, timetables and resources.
  • Monitoring and recording the portfolio company’s performance against agreed action plans, targets and timetables as part of 3i’s portfolio review process and by encouraging and supporting the portfolio company to adapt to new ESG requirements and developments in their particular business sectors.
  • Considering, at the time of exit, appropriate disclosure of material ESG matters, impacts and steps taken to manage them.

The RI policy has been fully integrated into our new investment and portfolio management processes, supported by:

  • A set of RI procedures that are applied consistently across all of our investment activities
  • An external specialist ESG firm conducts a review of all new investment opportunities which progress beyond the initial stage in 3i's investment process and where significant due diligence is commissioned. The specialist and produces a written summary report which flags potentially material issues, areas where further diligence is required pre-investment and where further work is required to be incorporated into the 180 day plan for the period immediately post-investment
  • Detailed guidance notes covering key sectors and issues, including case studies and information about international standards
  • An internal RI portal and in-house resource to support investment teams

 

The key elements of our investment policy which cover our responsible investment approach are:
 

  • Screening all new investment opportunities against our Exclusion and Referral lists.
  • At an appropriate stage in the investment process, carrying out a high level assessment of new investment proposals to identify potential material ESG risks and opportunities.
  • Where potential material ESG risks are identified, evaluating management’s commitment, capacity and track record in addressing ESG issues and whether specialist due diligence is required.
  • Where our due diligence identifies actual material ESG risks, 3i will require the portfolio company to commit to implementing appropriate measures to mitigate those risks.  Such measures may include meeting relevant International Standards (over a reasonable time frame) where these are more stringent than Applicable Laws.  3i will support the potential portfolio company to do so by developing action plans with appropriate targets, timetables and resources.
  • Monitoring and recording the portfolio company’s performance against agreed action plans, targets and timetables as part of 3i’s portfolio review process and by encouraging and supporting the portfolio company to adapt to new ESG requirements and developments in their particular business sectors.
  • Monitoring and recording serious incidents involving portfolio companies which result in loss of life, serious injury, material effect on the environment or material breach of law and by promoting corrective actions.
  • Considering, at the time of exit, appropriate disclosure of material ESG matters, impacts and steps taken to manage them.
  • We expect our potential portfolio companies to (i) comply with all Applicable Laws relating to environmental, social, health and safety, extortion, bribery and corruption matters; (ii) demonstrate that they have the commitment, capacity and track record to effectively identify, monitor and manage the potential ESG risks facing their business  (e.g. by having or committing to put in place: specific policies; regular reporting to the board; adequate management systems; clear assignment of responsibility; adequate training for staff and low injury and accident rates); (iii) where real, material environmental or social risks are identified through due diligence, be committed to implementing (within an agreed timeframe) appropriate measures to mitigate those risks which may include meeting relevant International Standards (where these are more stringent than Applicable Laws); and (iv) where real, material bribery risks are identified through due diligence, be committed to implementing (within an agreed timeframe) improvements or additions to their anti-bribery principles and bribery prevention procedures which are appropriate to their business and the bribery risks they face.  We do not expect that all of our portfolio companies will necessarily meet all of the minimum standards immediately following 3i’s investment. However, we do expect the executive management team to be fully committed to meeting the minimum standards within a reasonable timeframe and 3i will support them to do so.

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

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

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

URL/Attachment

URL/Attachment

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

02.4. Additional information [Optional].


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 overriding principle is that 3i will treat its customers fairly and will not place the interests of one customer above those of another, or its own interests above those of its customers.

3i acts at all times in accordance with the relevant regulated 3i entity’s fiduciary position as manager, and applicable FCA/SEC principles and rules around treatment of regulatory customers. 3i will also at all times comply with applicable legal and regulatory requirements.

Set out below are the steps taken to manage a conflict. Appropriate records of the consideration of conflicts will be kept at all stages

  1. Conflict of interest identified and information barriers put up as necessary
  2. Relevant 3i leadership group member(s) and Group Compliance consider and resolve the conflict, or refer it to the 3i Conflicts Committee if necessary
  3. 3i Conflicts Committee acts in a consultative role, advising on how to manage the conflict
  4. Where 3i is unable to resolve a conflict fairly, clear disclosure of the conflict will be made to the relevant customer(s) to enable them to take an informed decision.  3i will seek to resolve the conflict in collaboration with the customer(s).

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios (Private)


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