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TowerBrook Capital Partners

PRI reporting framework 2019

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Outputs and outcomes

PE 14. ESG issues affected financial/ESG performance (Private)


PE 15. Examples of ESG issues that affected your PE investments

15.1. Provide examples of ESG issues that you identified in your potential and/or existing private equity investments during the reporting year.

Investment Stage
ESG issues

ESG issues

          High interest rates
        
Sector(s)
          Financial Services
        
Impact (or potential impact) on the investment

Abandoning the deal  

Activities undertaken to influence the investment and its response

We evaluated an early stage high interest rate lending business.  We investigated the high interest rate lending strategy and identified concerns from an RO perspective, which caused us to walk away from the opportunity.  

Investment Stage
ESG issues

ESG issues

          Pawn Shop business
        
Sector(s)
          Consumer Retail
        
Impact (or potential impact) on investment

Abandoning the deal

Activities undertaken to influence the investment and its response

We conducted diligence on a profitable pawn shop business.  We ultimately decided in order to become more profitable, the company would need to attract more customers who would never repay loans and redeem their collateral.  We therefore decided the business did not meet our ESG requirements, and abandoned the business.

Investment Stage
ESG issues

ESG issues

          Leisure Center Business
        
Sector(s)
          Entertainment
        
Impact (or potential impact) on investment

Abandoning the deal  

Activities undertaken to influence the investment and its response

We conducted diligence on a  family leisure center business.   In the course of diligence we ultimately identified that the main source of revenue was from associated gambling facilities also managed from the group, which relied on repeat customers, many of whom likely had gambling addiction.  We ultimately decided to forego the opportunity as the business model was not consistent with our RO values. 

Investment Stage
ESG issues

ESG issues

          Manufacturing
        
Sector(s)
          Manufacturing
        
Impact (or potential impact) on investment

Bioethanol plant

Activities undertaken to influence the investment and its response

Project to construct a bioethanol plant that would enable the company to produce bioethanol by recycling a side product called brown liquor that is generated as part of the mill’s core manufacturing process. This investment is expected to significantly increase the earnings coming from green energy production, and to overall improve the financial profile of AustroCel Hallein.

15.2. Describe how you define and evaluate the materiality of ESG factors.

Materiality of ESG factors is evaluated on a case-by-case basis, and TowerBrook may walk away from a deal based on ESG-related issues at any point prior to signing.  Recent examples of the results of TowerBrook's engagement on ESG issues within the past few years include:

Specific examples of the results of TowerBrook's engagement on ESG issues within the past few years include:  

AustroCel Hallein:  Following TowerBrook’s acquisition, a project was approved to construct a bioethanol plant that would enable the company to produce bioethanol by recycling a side product called brown liquor that is generated as part of the mill’s core manufacturing process. This investment is expected to significantly increase the earnings coming from green energy production, and to overall improve the financial profile of AustroCel Hallein.

AIM Aviation: The construction of the new factory for Cabin Interiors in Bournemouth was delayed for 18 months to allow the clearance of rare snakes from the site. The presence of the snakes was uncovered by a survey undertaken by the company, which then declared the situation to the local authorities and cooperated fully with the wildlife consultants. The snakes were eventually removed and the factory is now under construction.

Kaporal: The company undertakes annual inspections of supplier factories to ensure that the requirements of its vendor manual and quality standards are being observed. In the last year, TowerBrook personnel accompanied the company teams to China and India in order to verify that the procedures laid out in the manual are being observed.

Metallo: Following TowerBrook's acquisition, a €35m capex project was approved to construct a new zinc fumer on the company's site in Belgium. The project was approved to further the company's strategy of being the industry's best in class with regard to observance of environmental standards. The zinc fumer effectively recycles the waste of other processes, thus enabling the company to move towards becoming a zero-waste green recycler.

TriMedx: TriMedx partners with healthcare providers to reduce the cost of managing and maintaining medical equipment fleets, unlocking substantial value for its customers who can redeploy savings towards patient care. Currently, the majority of TriMedx customers are not-for-profit hospital systems serving the needs of a variety of communities across the US. Through the TriMedx Foundation, the company also supports healthcare in emerging markets by sending used and donated equipment overseas. Since its founding in 2004 the TriMedx Foundation has provided over 7,400 volunteer hours to support communities in need.

FloWorks (formerly Shale-Inland): In the course of the due diligence TowerBrook identified manageable environmental concerns that led to bespoke environmental indemnities being negotiated, which afforded TowerBrook more robust protection than otherwise would have been available under general indemnification terms. Additionally, TowerBrook identified a steel plant with environmental issues pre-acquisition, and insisted that the plant in question be carved out of the transaction before it would proceed.


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