For fund selection, Access’ ESG due diligence articulates around the following points:
Pre- investment stage / Step 1: For each investment under due diligence, Access undertakes an Environmental, Social and Governance assessment with a view to identifying potential issues.
For fund selection: an SRI engagement questionnaire is sent to each fund manager under due diligence to find out whether and how ESG criteria are taken into consideration when investing in private companies or assets. Informal discussions with the fund management team are carried out during onsite visits to further assess the degree of recognition of ESG issues through the importance of non-financial criteria when analysing a potential acquisition, the existence of responsible investment policies (sector exclusions, audits, etc.), and the willingness to provide ESG related disclosure during the life of the fund / during the holding period of the asset for co-investments. Reviews include on-site visits, interviews with senior management and operational staff and examination of records, policies, handbooks on specific items (environmental policies, governance, health and security for employees, etc.). Whenever necessary, Access would commission ESG-related specialists to carry out independent reviews of ESG.
Further, in the legal documentation, Access seeks a written engagement from the underlying fund manager to use reasonable best efforts to incorporate ESG criteria in the management of its portfolio companies and to report annually on the ESG performance and progress in a portfolio company and to provide Access with an update if significant ESG issue arises in a portfolio asset.
For direct and co-investments: when evaluating a co-investment/direct investment opportunity, Access assesses the level of ESG integration in the lead investor’s due diligence / documentation. Access also identifies, through a specific Access’ ESG checklist and discussions with the management team, the potential ESG issues borne by the target investment. Through the ESG’ assessment, the Investment team highlights the main ESG risks and opportunities, notably by considering climate change and sustainable development related issues. In the event of Access being an existing investor in a fund managed by the lead-sponsor (most of the cases), Access would have already analysed how ESG criteria are taken into consideration when the fund manager is investing in private companies.
A summary of the ESG analysis pre-investment stage is inserted in the due diligence documentation submitted to the Access Investment Committee. Each fund manager / co-lead investor is given a score reflecting the level of integration of ESG criteria and the companies’ actions and new initiatives with regards to ESG issues. Access recognises three levels for assessment:
Level 1: the fund manager / co-lead investor fully meets responsible investment principles
Level 2: the fund manager / co-lead investor essentially meets responsible investment principles
Level 3: the fund manager / co-lead investor barely meets responsible investment principles